Workforce

Celebrity restaurateurs ask N.Y. to end the tip credit

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Almost two dozen prominent New York City restaurateurs have joined forces with a union-affiliated group to call for ending New York state’s tip credit.

The 22 operators, including big names such as Danny Meyer and Amanda Cohen, argue in a letter to New York Gov. Andrew Cuomo that restaurants should pay the same base wage to everyone, instead of counting servers’ tips toward the minimum hourly income they’re guaranteed under state law. At present, restaurants in New York can count as much as $7.50 of a server’s tips toward their mandated wage of $10.40 an hour. Employers directly pay just $2.90 of the amount, unless a waiter’s or waitress’s tips fall short of $7.50. They then are required to make up the shortfall.

Restaurants in New York City, Westchester and Long Island, where the cost of living is higher than the state average, are required to pay higher minimum wages than their peers elsewhere in the state.

“We believe that paying workers one fair wage by raising the subminimum wage currently in place for tipped workers to the regular minimum wage is good for workers and good for business,” reads the letter. “Workers can expect better wages and equal or better tips, and we can expect a more professionalized, more sustainable, and less sexually harassed workforce.”

Disallowing the tip credit might allow restaurants in New York to share front-of-house tips with back-of-house staffers, something that’s currently prohibited under federal law in states that allow restaurant employers to pay tipped employees a lower wage. Sharing gratuities might narrow the discrepancy between what servers and kitchen employees earn, a glaring gap that has greatly increased the difficulty of recruiting hourly employees for back-of-house jobs.

The letter was sent on behalf of RAISE, an operators’ group formed in affiliation with Restaurant Opportunities Centers United (ROC), a union-backed restaurant-worker advocacy group. It was drafted, published and presumably sent Tuesday, on the eve of final public hearings on disallowing New York’s tip credit. Six town hall-type information-gathering sessions have already been held throughout the state.

If New York scuttles the credit, it would become the eighth state in the nation to require full payment of the applicable minimum wage by employers. Last week, residents of Washington, D.C., added that jurisdiction to the list, voting in a referendum to require direct payment of a $15 wage to servers by 2026.

The battle in the district pitted another ROC-affiliated group, One Fair Wage, against operators and servers themselves, who have an advocacy group called Save Our Tips.  Growing out of a movement in Maine, Save Our Tips argues that servers’ income will be cut significantly if the tip credit is disallowed because customers will stop leaving gratuities.

Restaurant employers tend to favor a tip credit, with many saying they could not remain in business if they had to pay servers the full minimum wage mandated in their states.

Proposals to end the credit are under consideration in Dallas, Philadelphia and Massachusetts, among other areas.

Crain’s New York Business ran a copy of RAISE’s letter here.

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