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Cuomo proposal to increase wages for tipped workers opposed by some businesses

National Public Radio

New York Gov. Andrew Cuomo, who has instituted a minimum wage increase for most workers in the state, now wants to extend that rate to tipped workers, including wait staff and car washers. That news is causing a backlash from restaurant owners and small business groups.

The current state minimum wage for tipped workers is $7.50 an hour. That’s lower than the minimum wage for non-tipped workers, which ranges from $9.70 an hour upstate in some industries to $12 an hour for fast-food workers in New York City.

But under a provision known as the tip credit, employers are required by law to monitor the tips that wait staff and other tipped workers receive. If that amount falls short of the minimum wage prescribed for non-tipped workers, then the business owner has to pay the tipped employee the difference.

The governor, on a radio show hosted by New York City supermarket magnate John Catsimatidis, called it a “peculiarity” of state wage law that he’d like to fix. Cuomo wants all tipped workers to be paid the regular minimum wage instead of the lower rate. He said business owners don’t always follow the law, and as a result, the workers suffer.

“There are employee violations, where the employees were not making the minimum wage, and the employer was not making up the difference,” Cuomo said. “I’m going to start a set of hearings on that, because I don’t think it’s working well.”

The hearings would be held by the state Department of Labor. No date has been set yet.

The New York State Restaurant Association’s Melissa Fleischut said there already are many legal protections in place to make sure that tipped employees do make the minimum wage. And she warned that the change may have unintended consequences.

“The industry would argue it’s going to be a huge pay cut,” Fleischut said. “And it’s going to end up hurting the tipped employees.”

Fleischut said the proposed change could lead to restaurant owners rethinking whether to continue to custom of tipping.

“If you eliminate tip credit, I think you eliminate the incentive for a restaurateur to continue to have tipping in their restaurant,” said Fleischut, who added business owners are already overburdened with state labor rules and “hoops you have to jump through.”

Cuomo said there are other problems with the current pay structure for tipped workers. He said 70 percent of tipped workers in New York are women; African-American workers earn less money in tips; and the tipping dynamic can lead to sexual harassment.

Fleischut said she hasn’t seen the data that the governor cites, but said those arguments make the case to end tipping altogether.

Mike Durant with the National Federation of Independent Businesses said the change would “disrupt” the restaurant industry as well as other types of small businesses. He said it’s yet another change, just as businesses are struggling to keep up with the minimum wage increases and a new paid family leave policy that takes effect in 2018.

“It shows you how far this governor has gone to increase labor costs on small businesses,” Durant said.

Durant predicted the proposed change would hasten the trend toward automated services, like using iPads to take customer orders, and will result in fewer jobs in the future.

Assemblymember Steve Hawley (R-Batavia) also came out against Cuomo’s proposal.

“The governor’s war on small businesses continues with this new proposal,” Hawley said in a statement. “Many workers in the service industry are competitively compensated due to the large share of their income that is comprised of tips. By allowing our employees to be paid by tips we are letting their performance and work ethic determine their income to a large extent which raises standards across the industry and provides a better quality of service. Another minimum wage hike will surely be a blow to small businesses and stifle job creation when what we need is tax and regulatory reform to allow these companies to thrive.”

Karen DeWitt is Capitol Bureau Chief for New York State Public Radio, a network of 10 public radio stations in New York State. WBFO listeners are accustomed to hearing DeWitt’s insightful coverage throughout the day, including expanded reports on Morning Edition.