Saratoga Springs

Restaurant industry argues for lower wages for tipped workers

Cuomo proposal would boost minimum wage for employees who receive tips

Categories: Business, News, Schenectady County

SARATOGA SPRINGS — The state restaurant industry on Monday warned that Gov. Cuomo’s plan to eliminate the lower minimum wage for workers who get tips would hurt restaurants and employees alike.

Restaurants will pay much more in labor costs and servers will take a big pay cut because customers will stop tipping them, the New York State Restaurant Association said. Waiters and waitresses in particular make far more than minimum wage at many restaurants, once their tips are added to their hourly wage, the association said.

Under the complicated structure put in place by state officials, there are more than a dozen minimum wages in the state, depending on what a worker is doing and where. In upstate New York for 2018, minimums range from $11.75 an hour for certain fast food workers to $10.40 for most other workers to $8.65 for tipped service workers to $7.50 for tipped food service workers.

In December, as a preview of his State of the State address, Cuomo announced he had ordered the state labor commissioner to evaluate the elimination of the alternate minimum wage scales for both groups of tipped workers, food service (such as in restaurants) and service (such as in hotels or car washes). 

“At the end of day, this is a question of basic fairness. In New York, we believe in a fair day’s pay for a fair day’s work and that all workers deserve to be treated with dignity and respect,” he said, adding that he wanted to ensure workers were not more susceptible to exploitation because they rely on tips.

Restaurateurs, facing a 39 percent increase wage hike for their front-of-restaurant staff if the proposal becomes reality, are opposed to the plan, not surprisingly. At least some servers have come out against it, as well.

The New York State Restaurant Association publicized its opposition to the proposal Monday in Saratoga Springs, with restaurant owner and employee testimonials.

“The restaurant industry as a whole will not be able to sustain that,” said Nancy Bambara, vice president of DZ Restaurants, a group of three Saratoga Springs eateries: Forno, Chianti and Boca. “We can’t raise prices in this area, not if we want to be competitive.”

She said the proposal is doubly misguided: First, most servers make a lot more than minimum wage, and second, employers are required to pay workers extra if their tips don’t bring them up to at least $10.40 an hour.

“If they do not make that difference, I have to pay that. New York has a system in place to protect those kinds of employees across the board.”

Forno server Tiffany Hodum said she fears most of her customers won’t leave tips once they see that the state has eliminated the lower minimum wage and restaurants have boosted menu prices to cover the higher costs of labor.

“The tipped employees are not asking for this,” Hodum said. “Changing things around will so harshly affect so many of the servers.”

Her husband, Kevin Hodum, is a full-time server at Chianti but she works only the two busiest days of the week at Forno. She did not want to publicly state the family income, but said it was sufficient to make car and mortgage payments and pay for day care tuition as needed for their 3-year-old son.

The couple have worked a combined 14 years at the two restaurants.

Restaurant Association spokesman Kevin Dugan said the impact would be dramatic on his member restaurants, and also on the servers who work in them. Servers are, he said, almost always the highest-paid workers in a restaurant.

He said restaurants likely would start putting “gratuity included” notices in their menus to deflect customers’ surprise at the sudden price hikes needed to cover salaries rising from $7.50 to $10.40 an hour upstate.

“I think you’re going to see a large education process here.”

Some of the criticisms apparently were anticipated in the Capitol.

Cuomo’s office on Friday announced a series of public hearings on the issue. (The only Capital Region hearing is at 10 a.m. Friday, May 18, in the Legislative Office Building. Preregistration is required.)

The announcement included a few rebuttals to complaints raised by the restaurant industry.

“This proposal would not eliminate tipping, only the subminimum wage,” it said. “Hearings will be presided over by state Labor Commissioner Roberta Reardon and will be focused on the scope of the problem, including the hardships created by tipping, reasons for and ramifications of eliminating the subminimum wage in impacted tipped occupations (i.e., car wash worker, beautician, waiter, bartender, dog groomer, tow truck driver, wedding planner, tour guide, etc.) and recommendations for the potential elimination timeline and complicating factors.”

In the same announcement, Reardon said: “Tipped workers have a higher rate of poverty and face drastic wage fluctuations based on tips. I encourage anyone who would be impacted by these hearings to submit testimony to ensure we have a complete picture of how eliminating this subminimum wage could impact workers and businesses.”

Friday’s news release said, without explanation, that the change is not expected to alter customers’ tipping practices.

When he announced his proposal in December, Cuomo also said:

  • African-American workers are often tipped less than their white counterparts.
  • Workers on certain shifts are generally tipped more than others.
  • Tips can fluctuate greatly even from week to week, creating financial uncertainty.
  • More than 70 percent of tipped workers in New York are women.
  • In states that require the full minimum wage be paid to tipped employees, workers experience half the rate of sexual harassment compared to workers in states that pay lower wages to tipped employees, according to a 2014 study by the Restaurant Opportunities Centers. 
  • The tip credit itself was an unintended consequence of a 1986 consolidation of wage orders.
  • In practice, many employers find it difficult to keep track of employee tips properly, making it easier to accidentally miss their wage obligations or intentionally commit wage theft.
  • Anecdotal evidence suggests that tips do not always make their way into workers’ hands.
  • In 2008, the Department of Labor found that half of 84 car washes inspected across the state violated minimum wage and overtime laws, with some paying just $3 an hour. 

Cuomo’s news releases didn’t indicate whether he would seek to eliminate the tipped minimum wage through a wage board action or whether the move would require state Legislature approval. 

A wage board was used to create a higher minimum wage for fast food workers in 2015. An act of the Legislature in 2016 was needed to boost the minimum wage for the rest of the workforce.

Dugan, of the Restaurant Association, said there are alternate theories on whether the proposal can be enacted without the Legislature’s approval.

Bambara, of DZ Restaurants, said she hoped the change is not a foregone conclusion.

“I’m certainly concerned that this is not going to go before the Senate,” she said. “We need to rally the restaurant owners to attend the four upstate hearings that are happening.

“More importantly, the tipped employees need to speak out.”

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