The Restaurant Opportunities Center (ROC) and its affiliated non-profit One Fair Wage (OFW) have relentlessly demanded that New York state lawmakers scrap the tip credit, which allows restaurant employers to count tips towards the minimum wage requirement. While it aggressively pushed Governor Andrew Cuomo to raise the state minimum wage and remove the tip credit, he continued to keep the tip credit intact after restaurant employees pushed back (although the size of the tip credit has shrunk dramatically over time). Now that Cuomo has resigned his post amid sexual harassment allegations, what will rising Lieutenant Governor Kathy Hochul do to steer the state’s wage priorities?
Restaurant employees have long advocated for keeping the tip credit system, because they say they can earn well beyond the minimum wage through their tips – as high as $45 per hour or even $100 per hour. Studies show that tip percentages and tip income fall significantly when tip credits are reduced or eliminated, as customers learn about new flat minimum wage policies or restaurants encourage guests not to tip due to increased menu costs to adapt to higher mandated wages.
Over the course of the last several years, rising minimum and tipped wages have had a serious negative impact on the number of jobs and restaurants in New York State state – reducing the number of opportunities for highly lucrative tipped positions for employees. Currently, the minimum wage is set to $15 in New York City and Nassau, Suffolk, and Westchester counties, and a $12.50 in the remainder of the state. The tip credit remains intact, although has been reduced – now $10 per hour in NYC and surrounding counties, and $8.35 per hour statewide.
According to Bureau of Labor Statistics data, New York State has experienced declining full-service restaurant growth throughout the state correlated with minimum wage hikes over the last several years, resulting in the loss of more than 10,000 jobs and over 1,200 restaurant locations between 2017 and 2019.
Looking Forward to Lt. Governor Kathy Hochul’s Takeover
In her statements following Cuomo’s resignation from office, soon-to-be Governor Kathy Hochul lauded his accomplishments on employment policies such as enacting a $15 minimum wage and paid family leave.
The Restaurant Opportunities Center and One Fair Wage have already seized the opportunity to urge Hochul to reverse Cuomo’s track record on ending the tip credit, despite what restaurant employees actually want for their jobs. At the time Cuomo proposed eliminating the tip credit in 2018, hundreds including tipped restaurant employees attended hearings to voice their opposition to One Fair Wage’s wish list:
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A “Supporters of the Tip Credit in NY” Facebook group, organized by server Maggie Raczynski, gained over 20,000 followers in 2018 at the time of Cuomo’s hearings on the impacts of eliminating the tip credit.
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A Change.org petition also gained over 12,000 signatures in support of saving the tip credit, opposing Cuomo’s proposal.
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Hundreds of people attended each of seven hearings set up by the Cuomo administration – with many tipped workers testifying on behalf of the tipping system and saving the tip credit.
“The system is working the way it is, please leave it alone. We don’t need to be saved.” – Caitlin Bailey, restaurant employee, Watertown hearing
“Servers already make $25 to $50 an hour.” – Beth Alexander, restaurant owner, Watertown Hearing, who estimated eliminating the tip credit would raise prices by 40 percent.
“I make plenty of money. I am not a victim…We don’t have anything wrong. We’re not broken. We don’t need to be fixed.” – Joedy Hill, restaurant employee, Syracuse hearing
“I fear for my fellow employees because if the tipping wage is raised to meet the actual minimum wage I feel that the likelihood of getting tipped regularly will decrease dramatically.” – Peter Kazmierczak, restaurant employee, Buffalo hearing
“My main income is through my tips…It hurts us a lot more than it would ever help us. Right now leave it how it is, we don’t want it, we don’t need it.” – Kay Clifton, restaurant employee, Buffalo hearing
To reinvigorate its cause, One Fair Wage has hijacked the news of the serious allegations of sexual harassment levied against Cuomo, in order to further its own interests ahead of the needs of the industry’s employees.
The nonprofit has a history of using unfounded and debunked claims of racial and sexual harassment to campaign on eliminating the tip credit both prior and during the pandemic – a time when many restaurant employers are struggling to remain open and retain opportunities for their employees and tipped jobs. When New York City began allowing restaurants to implement a dining surcharge to aid restaurants struggling to make ends meet and pay their employees amid government pandemic restrictions, One Fair Wage complained this would take away tip income from employees. This position actually negates one of OFW’s core arguments when pushing for restaurants to move to a flat minimum wage system — last week they released a guide suggesting restaurants that stop using the traditional tip credit system and start paying a flat minimum wage should transition to a dining surcharge model to help offset increased labor costs.
Now, using sexual harassment allegations against Cuomo as her latest hook, One Fair Wage president Saru Jayaraman says that eliminating the tip credit is the “single most effective means to cut sexual harassment in the restaurant industry.” Unfortunately, the data is not on her side. Analysis of Equal Employment Opportunity Commission data shows there is no negative relationship between a state’s tipped wage and restaurant sexual harassment charges. In fact, all seven states that do not allow employers to use a tip credit (California, Oregon, Washington, Nevada, Montana, Minnesota, and Alaska) had a higher prevalence of sexual harassment charges than New York (which does allow a tip credit).
ROC and One Fair Wage have been brazen in their advocacy for the Governor of New York to use executive action to mandate wages, without opening up deliberations within the legislature and allowing a forum for opposition, even from the tipped employees that would be negatively affected. Upon Cuomo’s announcement of his resignation from office, One Fair Wage began the push to get his replacement to do what he never did: eliminate the state tip credit and cost jobs and livelihoods for New York’s restaurant employees.
Nevertheless, Governor Hochul must pay attention to the concerns of thousands of New York’s tipped restaurant employees over the interests of activists, and avoid exacerbating the industry’s trend of negative growth and struggles to recover from the pandemic.