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New York State Department of Labor

Governor Cuomo Unveils 5th Proposal of 2018 State of the State: Examine Eliminating the Minimum Wage Tip Credit To Strengthen Economic Justice in New York State


Directs Commissioner of Labor to Hold Hearings to Evaluate Eliminating Tip Credit

Tip Credit Allows Employers to Pay Lower Wage than Minimum Wage

Practice Disproportionately Affects Women and People of Color in Service Industries and Linked to
Higher Rates of Sexual Harassment

Builds on Governor's Record of Fighting for Workers' Rights and Economic Justice

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Albany, NY (December 17, 2017) -

Governor Andrew M. Cuomo today unveiled the fifth proposal of the 2018 State of the State: direct the Commissioner of Labor to schedule public hearings to examine industries and evaluate the possibility of ending minimum wage tip credits in New York State. In certain workplaces, such as car washes and restaurants, where wages and tips are both generally low, workers' income can rely entirely upon tips. These tips, meant as a reward for good service, instead serve as a critical wage subsidy that brings workers' wages just up to the legally mandated minimum wage. The Governor made the announcement this morning on the CATS Roundtable with John Catsimatidis.

"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," Governor Cuomo said. "There should be no exception to that fairness and decency. I have directed the Department of Labor to ensure that no workers are more susceptible to exploitation because they rely on tips to survive. I look forward to reviewing the findings of these hearings."

More than 70 percent of all tipped workers in New York are women. Further, studies have shown that African-American workers are often tipped less than their white counterparts. Tipped workers often report not being willing to come forward because they are reliant on their employers for shift scheduling, with certain shifts generally tipping more than others. In addition, tipping practices have been linked to higher rates of sexual harassment. Workers in states that require the full minimum wage be paid to tipped employees 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 Center. The study's chief recommendation was to eliminate the sub-minimum wage for tipped workers to reduce the pressures that increase sexual harassment to create a safer and more equitable workplace.

The New York State Department of Labor will hold public hearings to solicit input from workers, businesses and others. Those who wish to testify will be able to pre-register on the Department's website. The Department will issue a notice identifying the specific times and locations for the hearings.

State Labor Commissioner Roberta Reardon said, "Under Governor Cuomo, New York is leading the nation on issues of worker justice. The Department of Labor will closely examine the issue of tip credits, informed by testimony from workers and businesses alike."

In 1986, a general industry wage board recommended consolidating various wage board orders for different industries by eliminating the wage orders for various separate industries and having those industries included under the miscellaneous industries wage order. Since the tip credit system was allowed under the miscellaneous industries wage order, the consolidation had the unintended consequence of establishing a tip credit in various industries where the tip credit had previously been prohibited.

In practice, many employers find it difficult to keep track of employee tips properly, especially in industries where tips are not a steady and reliable source of income that can be depended upon by workers to meet their living expenses, and where daily and weekly fluctuations make it difficult for workers to know whether they are being underpaid. Complicated tip credit recordkeeping can make it difficult for employers to know whether they are meeting their obligations, and can be a vehicle for wage theft when employers fail to pay workers properly.

Anecdotal evidence suggests that tips do not always make their way into workers' hands, further reducing their income, and the "topping up" of tipped workers by their employers is difficult to enforce when records are not properly kept. This can also require the Department of Labor to expend extensive investigative resources to check records and calculations. This is not always intentional on the part of the employer, as it can be difficult to keep track of employee tips properly. Some employers have voluntarily eliminated tips and increased base pay on a "service-included" system.

In 2008, the Department of Labor found that nearly eight out of every 10 carwashes in New York City and one out of two across the state violate minimum wage and overtime laws, with some paying just $3 an hour. Investigators visited 84 carwashes throughout the state and uncovered $6.5 million in underpayments to 1,380 workers. In 2014, Attorney General Eric Schneiderman and the Department of Labor held John Lage, a carwash kingpin, liable for $3.9 million for labor violations including cheating his workers out of wages and tips.

Throughout his administration, Governor Cuomo has fought to protect workers' rights. In 2015, Governor Cuomo launched the first-in-the-nation Task Force to Combat Worker Exploitation to root out worker exploitation in multiple industries across the state. In the first nine months of 2017, $19.8 million wasreturned to 27,200 victims of wage theft. Since Governor Cuomo took office, the state has recovered and returned more than $170 million to workers, the highest total in the nation.

In 2016, Governor Cuomo signed a statewide $15 minimum wage. The schedule is available here.

Stuart Appelbaum, President of the Retail, Wholesale and Department Store Union (RWDSU), said, "No worker should earn below the minimum wage - ever. For far too long workers in New York have earned poverty wages. We have been working for years to improve conditions for car wash workers. Today, Governor Cuomo recognized that this abhorrent loophole has left immigrant workers susceptible to wage theft, and 5,000 workers now have a chance to earn fair wages for their work. His announcement today is an important next step in ensuring that no worker in New York State is underpaid and impoverished."

Paul Sonn, General Counsel at the National Employment Law Project said, "Governor Cuomo has been a national leader in championing reforms to improve low-wage jobs. In 2016, he made New York one of the first states to begin raising its minimum wage to $15 an hour, and to guarantee paid family leave. Previously in 2015, the Cuomo Administration reduced the tip credit for restaurant and other hospitality workers. Governor Cuomo's announcement that New York will review the 'tip credit' for workers will improve the lives of tens of thousands of struggling New Yorkers, most of them immigrants. Even with tips, workers are barely scraping by. There's no good reason not to expect employers in these jobs to pay the full minimum wage as most other employers do."

Anyone who wishes to file a wage theft complaint is encouraged to call 1-888-4-NYSDOL.

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