N.Y. decides to keep restaurants’ tip credit

But other industries will lose that break for employers under proposals that were put forth this week.
Photograph: Shutterstock

Full-service restaurants in New York can continue to count tips as a portion of servers’ wages despite a decision this week by Gov. Andrew Cuomo to end the practice in a number of other fields.

The New York State Department of Labor (NYSDOL) released a study on Monday that summarizes what it learned about wages and payment practices through a series of public hearings held across the state in 2018. The restaurant industry had feared that the upshot would be a proposal to end the tip credit and require the payment of a $15 cash wage to all employees, regardless of whether they receive gratuities. 

The report indeed called for killing the tip credit, but only for jobs falling within the state’s classification of miscellaneous occupations, which include car wash attendant, nail salon worker, tow truck driver, dog groomer, wedding planner, tour guide, valet parking attendant, hairdresser, golf and tennis instructor and doorperson. 

The study said that 70,000 workers across the state are included in the miscellaneous category. The NYSDOL called for those individuals to be paid the full minimum wage directly by their employers within a year of the rule’s revision.

All foodservice jobs are grouped into a different category under New York’s classification of professions and industries. The NYSDOL proposed no changes for tipped positions falling within that group. 

Cuomo has already indicated that he intends to fulfill the report’s recommendations.

The study did not say why NYSDOL had decided to maintain a tip credit for restaurants. But it noted that in some industries, “tips are so common that total compensation far exceeds the minimum wage [and] therefore some offset of the minimum wage may be warranted.”

In contrast, the study noted several times that determining the wages of tipped employees in other fields is complicated, haphazard and often unfair, with practices that lead to wage theft and stiffing workers on gratuities. It cited the example of a car wash that set up a tip box that was maintained and emptied by management, which allocated the money as it saw fit.  

Groups representing restaurants and tipped employees described NYSDOL’s omission of hospitality workers in its recommendation to Cuomo as a victory for their constituents. "Today is a huge win for tipped workers and the entire restaurant industry across New York state,” said Joshua Chaisson, a server from Maine who serves as VP of Restaurant Workers of America, an association that lobbies on behalf of tipped restaurant employees. Keeping the tip credit is “what we, the workers, actually want.”

“This recommendation reinforces the fact that the hospitality industry, which provides positive economic opportunities and advancement for hundreds of thousands of New Yorkers, is fundamentally different than these other industries,” the New York City Hospitality Alliance, an association of restaurants, taverns and nightclubs, said in a communication to members this morning. 

NYSDOL suggested in its report that the groups and their constituents were right to claim success in getting their messages across. “It should be noted that several hospitality businesses submitted copies of their pay records as part of their written comments and others further offered to open their books to Department representatives,” the study noted. The information helped officials understand the situation in the hospitality industry despite a dearth of hardcore statistical data on tipping and the use of the tip credit, the report continued.

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.


Exclusive Content


Trend or fad? These restaurant currents could go either way

Reality Check: A number of ripples were evident in the business during the first half of the year. The question is, do they have staying power?


Starbucks' value offer is a bad idea

The Bottom Line: It’s not entirely clear that price is the reason Starbucks is losing traffic. If it isn’t, the company’s new value offer could backfire.


Struggling I Heart Mac and Cheese franchisees push back against their franchisor

Operators say most of them aren't making money and want a break on their royalties. But they also complain about receiving expired cheese from closed stores. "Don't send us moldy product."


More from our partners