When the New York legislature enacted minimum wage legislation last year resulting in the series of increases  to the minimum wage currently underway, legislators reached a temporary agreement not to increase the cash wage applicable to most tipped workers under New York State’s Wage Orders ($5.00 per hour under the Wage Order applicable to the Hospitality Industry), thereby  increasing the “tip credit.”  Last week, Governor Cuomo convened a new wage board to analyze the status of tipped worker wages and make recommendations regarding potential increases.

Some States do not permit any tip credit against wages under state law, whereas under federal law, tipped workers can be paid a cash wage of $2.13 per hour ($5.12/hour tip credit).  New York worker advocates have urged for the elimination of any tip credit in New York, arguing that tips are a separate transaction between a customer and a service person which are not intended as a substitute for an employer-paid wage.  Business and employer groups counter both that tip income is substantial (and as such should be recognized in the minimum wage scheme), and that a non-incremental increase which eradicates the tip credit entirely or greatly reduces it would constitute a sea change not affordable by the overwhelming majority of smaller industry employers already preparing to cope with changes necessitated by the Affordable Care Act, as well as other increased operating costs.

The Wage Board has been given a February 2015 deadline to conduct the necessary public hearings and report its findings.  Industry groups, individual industry employers and employee advocacy groups all will have an opportunity to make submissions to the Wage Board once it narrows and focuses its areas of specific inquiry.  We will apprise of further developments in this area.