Employees who work for businesses that fall into a category called “miscellaneous industries” will no longer be allowed to be paid what the New York State Department of Labor calls a “subminimum wage.” Instead they will be paid a full minimum wage along with their tips.
Among those affected by the new order are nail salon workers, hairdressers, aestheticians, car wash workers, valet parking attendants, door-persons, tow truck drivers, dog groomers and tour guides. The restaurant industry, where tipping is ingrained, is not affected.
The Labor Department directive will phase out by Dec. 31, 2020, the ability for employers in these industries to use the tips their employees receive to reduce the amounts they have to pay the workers.
The practice has been for tipped employees in these industries to be paid below the state minimum hourly wage by the employer if they earned enough in tips to make up the difference.
The state minimum wage for Westchester is $13 an hour until Dec. 31, 2020, when it becomes $14 an hour.
In his 2018 State of the State address, Gov. Andrew M. Cuomo directed the state labor commissioner to examine the impact of the state policy allowing employers to take tip credits against minimum wage payments they have to make.
As part of the study, the Labor Department analyzed data that showed about 70,000 employees in the miscellaneous industries in the state likely were affected by the ability of their employers to use employee tips as credits against the minimum wage.
The department conducted seven public hearings and received more than 3,000 written comments. It found that there was widespread confusion among the workers as to whether they were entitled to earn the state’s minimum wage as well as rampant wage theft by employers.
The amounts employers have to pay and the credits that can be applied from tips are calculated using, in part, “high tips” and “low tips” amounts set by the state. The system was characterized in the Labor Department report as being complex and confusing.
“Each individual employer may calculate the amount of tips typically given to that employer’s employees, and compare that amount to the ‘high’ and ‘low’ numbers…The employer then determines the required cash wage based on whether the tips are below the ‘low’ threshold, between the ‘low’ and ‘high’ thresholds, or above the ‘high’ threshold,” the report said.
The report noted, “In a past assessment of wage theft cases investigated by the Department of Labor, nearly two-thirds of all minimum wage-related cases were in the miscellaneous industries covering miscellaneous industry workers. In 80% of cases, underpayments were found. In the hearings, numerous workers in the miscellaneous industries reported having their wages stolen.”
The report recommended that the tip wage credit be eliminated with a one-year phase-in that would, in part, give businesses time to adjust to the changes.
In announcing the order, Cuomo said, “It’s clear the tip system in many situations is needlessly complicated, allowing unscrupulous businesses to flout our nation-leading minimum wage laws and robbing workers of the paycheck they earned. That ends now.”