In a move opposed by New York restaurant industry and business groups and backed by the governor and labor union chiefs, the state”™s labor commissioner has ordered a raise in the minimum cash wage for tipped hospitality workers to $7.50 per hour.
That amounts to a 50 percent increase in the minimum that restaurant servers, one group of workers affected by the change, must be paid.
The substantial increase, first recommended by a minimum wage board appointed last year by Gov. Andrew Cuomo and authorized in a Feb. 24 order by acting Commissioner of Labor Mario J. Musolino, will take effect Dec. 31.
The state”™s minimum wage for all workers is $8.75 per hour this year and will increase to $9 per hour in 2016, at the same time that hospitality employers will see their tip credits shrink when calculating service workers”™ wages and their payrolls increase as the higher cash wage for tipped workers takes effect.
The uniform minimum wage for tipped workers will eliminate the state”™s system of separate minimum cash wage rates for food service workers, who are paid $5 per hour in 2015; hospitality service employees, currently at $5.65 per hour, and service workers in resort hotels, who receive a minimum $4.90 per hour in wages before tips. Those rates last increased in 2011, according to the governor”™s office.
As recommended by the wage board, the labor commissioner also agreed to review whether New York”™s system of cash wages and employers”™ tip credits should be eliminated.
Musolino rejected the wage board”™s recommendation that the tip allowance for employers be increased by $1 per hour when the weekly average of cash wages and tips equals or exceeds the state”™s hourly minimum wage rate by 120 percent outside New York City and by 150 percent in the city. The New York City Hospitality Alliance had lobbied the wage board to include that provision.
Cuomo in a press release called the Labor Department”™s order raising the minimum wage for tipped workers “an important step” toward ensuring “that opportunity is available to all workers.” He said the increase makes New York”™s minimum wage for those workers among the highest in the nation.
Cuomo said it must be followed by another increase in the state”™s minimum wage for all workers. His proposal to raise the standard minimum wage to $10.50 per hour statewide, and to $11.50 in New York City by Dec. 31, 2016, is opposed by business groups that include The Business Council of New York State Inc. and the National Federation of Independent Business in New York.
The governor”™s office cited a National Employment Law Project report that 70 percent of New York”™s approximately 229,000 tipped workers are women and that tipped workers are twice as likely to fall below the poverty level as other New Yorkers. Restaurant servers make up more than half of tipped workers who live in poverty and experience poverty rates that are triple those for other workers.
The New York State Restaurant Association had urged the labor commissioner to reject the wage board”™s recommended pay hike for tipped workers. Melissa Fleischut, president and CEO of the association, said it “will handcuff small businesses”™ ability to create jobs, decrease the pay of non-tipped employees, and reduce hours for tipped employees.”
“It”™s troubling that the acting commissioner ignored legislative precedent and the pleas of nearly 1,000 hospitality industry representatives who asked him for a moderate increase phased in over time,” Fleischut said in the wake of the commissioner”™s decision. “By rubberstamping an extreme, unprecedented 50 percent increase it becomes hard to believe New York is really ”˜Open for Business.”™” “Open for Business” has been the Cuomo administration”™s marketing campaign slogan when recruiting businesses to start, expand or relocate in New York.
The state restaurant association noted the state”™s tip credit for food service workers was created 75 years ago and historically has amounted to 60 to 70 percent of the standard minimum wage. The approved increase will raise that percentage to 83 percent of the minimum for those workers, whose average hourly income already is well above the minimum wage, according to the association.
At the National Federation of Independent Business in Albany, the group”™s state director blasted the Cuomo administration for pushing for the minimum wage in the hospitality industry.
“Once again this administration strengthens their relationship with labor at the expense of small employers,” Michael Durant said. The NFIB director said the small businesses tax cut proposed by Cuomo in his State of the State address ”” a 4 percent cut in the state”™s corporate franchise tax phased in over three years ”” will not offset the increase in the tipped wage and Cuomo”™s proposed minimum wage hike in 2016.
“Simply put, the governor”™s small-business agenda is heavy on rhetoric and weak on substance,” Durant said.
A veteran of the restaurant industry in Westchester County said the wage increase for tipped workers will have a harmful effect on restaurateurs here.
“I can guarantee that the tipped wage increase is going to hurt the local restaurant operators, and most likely they will be forced to raise prices or lay off staff or both,” Gerry Houlihan said. A former restaurant owner who headed the Westchester-Rockland chapter of the New York State Restaurant Association, Houlihan owns Houlihan Business Brokers Inc., a Bronxville company specializing in the sale of restaurants, bars and food-related businesses.
Houlihan noted the tipped wage hike will come on top of the state”™s $1.50 increase in the standard minimum wage that is being phased in over two years.
“Most successful restaurants in our area net 10 percent a year after all expenses,” he said. To net that percentage, restaurant owners on average need to keep payroll between 30 percent and 32 percent of total sales, though payroll accounts for 34 percent to 38 percent at some high-end restaurants here, he said.
For a restaurant doing $20,000 a week in sales, the broker estimated, the $2.50 increase in a server”™s hourly wage will increase the weekly payroll by $600 to $800, or $30,000 to $40,000 on an annual basis, raising payroll from 32 percent to 35.5 percent of sales.
“The restaurant industry is very competitive and most operators are very reluctant to raise prices or lay off staff, but at this point there are very few other options,” Houlihan said.
Westchester”™s hotel industry, dominated by the large national and international brands, will be little affected by the wage hike for tipped workers, according to the president of the 31-member Westchester Hotel Association.
“No one”™s really made a big deal of it,” said Daniel Conte, general manager of the Westchester Marriott Hotel in Tarrytown. “Everyone”™s over the non-tip minimum (wage), let alone the tip minimum. ”¦Most of us are way over the minimum anyway.” At the Westchester Marriott, the lowest cash wage for a tipped worker is $8.75 an hour, or $1.25 more than the minimum set to take effect at the end of this year.
For hotel association members in the county, “It”™s almost a nonissue to us,” Conte said.
Strippers will get screwed – better off keeping the cash.