As of Dec. 31, 2018, the minimum wage for large employers with at least 11 employees in New York City became $15 per hour. On Dec. 31 of this year, small New York City employers with under 11 employees will also be subject to the minimum wage of $15, according to the New York Department of Labor.
Interaction of minimum wage and tips: the tip credit
For large-employer restaurants, if a server earns at least $5 per hour in tips, the employer may pay a minimum wage of $10. In theory, the tips would make up the difference so that the amount received would still be the usual minimum wage of $15 hourly. This practice allows the restaurant-employer to take a “tip credit” of $5 and to pay out the difference between the minimum wage and the minimum wage after subtracting the tip credit amount.
New York City restaurants have more than weathered the higher minimum wage
There was concern when the minimum wage jumped for New York City restaurants that some would not be able to afford such wages.
On Oct. 28, a labor and employment law professor at University at Buffalo, The State University of New York, wrote an editorial in The Conversation in which she makes the case that, in fact, not only have New York City restaurateurs not suffered from paying out the higher wage level, but also both their profits and hiring numbers have climbed.
Professor Nicole Hallett explains that many New York City restaurants responded to the wage increase by raising menu prices, but that this has not hurt business. Because prices do not need to go up much to offset wage increases, both restaurant employment and revenues are higher.
The author credits strong state economic conditions for this trend. She also notes that higher wages probably keep turnover lower and enrich job performance.
Tip credit in question
Finally, she predicts further controversy over the question whether legislators should abolish the tip credit, which would require restaurants to pay full minimum wage despite tipping. Opponents of the credit note that regular minimum wage payments are more stable for workers and that female servers suffer sexual harassment by customers less often when they are paid minimum wage and not dependent on customer tips for minimal earnings.
Legal counsel important for both employers and employees
Every New York City restaurant should develop a relationship with an experienced employment lawyer to receive guidance in complying with ever-evolving minimum wage laws and regulations and to assist should anyone accuse the restaurant of noncompliance. On the other hand, servers and other restaurant employees should seek legal counsel with any concerns about minimum wage or tip crediting practices.