Restaurants in New York would lose the tip credit under a regulatory change proposed Sunday by Gov. Andrew Cuomo.
Disallowing the credit would not only escalate restaurateurs’ labor costs, but also widen the gap between tipped employees and back-of-house workers who collect a straight wage. Servers and delivery people would in effect get an automatic raise of $2.90 to $4.35 per hour, depending on where their restaurant is located and how many people it employs.
Because of the discrepancy between front-of-house and back-of-house staff members, full-service restaurants have been struggling to recruit kitchen workers.
Gov. Cuomo said the tip credit—a go-ahead for employers to count gratuities toward an employee’s minimum wage—needs to be killed because workers who rely on tips are often cheated out of the money. He cited a discontinuation of the practice as one of his prime goals for 2018.
“In practice, many employers find it difficult to keep track of employee tips properly,” the governor’s office said in a statement detailing Cuomo’s proposal. The record-keeping challenges “can be a vehicle for wage theft when employers fail to pay workers properly.” In addition, “anecdotal evidence suggests that tips do not always make their way into workers' hands.”
The statement also noted the assertions from Restaurant Opportunities Centers United, a union-like labor advocacy group, that tipping credits foster sexual harassment. The governor’s office cited a controversial ROC research study that concluded a tip credit doubles a female server’s likelihood of being harassed on the job.
"At the end of day, this is a question of basic fairness,” Cuomo said in the statement.
The governor directed the state Department of Labor to begin hearings on disallowing the tip credit.
Seven states, including California, do not allow employers to use a tip credit.
New York is the industry’s fourth-largest market in terms of number of restaurants, behind California, Texas and Florida.