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Will Elimination of Tipping Reduce Wage-And-Hour Risks?

by Jordan R. Bernstein and Rana Nader
March 13, 2015

Jordan Bernstein and Rana Nader's article, " Will Elimination of Tipping Reduce Wage-And-Hour Risks?" was published in Law360 on March 13, 2015.

From the article...

"With minimum wage increases already taking effect around the country, and the threat of tip credit-related lawsuits, many in the restaurant and hotel industries are rethinking the use of tipped-based compensation models for their employees.

The Increasing Minimum Wage

The New York State Department of Labor’s Wage Board just recently passed a 50 percent increase in the minimum hourly wage for tipped workers — from $5 to $7.50. The New York State Restaurant Association has argued that the wage hike will hit small businesses hard, and has reasoned that despite New York’s tip credit allowance, restaurants will see their payroll for tipped employees increase by 50 percent, which will inevitably force them to eliminate up to one-fifth of their tipped employees.

California is one of only seven states that prohibit a tip credit. Section 351 of the California Labor Code mandates that employers must pay employees the full minimum wage regardless of the amount of money they collect in gratuities. California is also in the midst of a progressive state-level minimum wage increase; the minimum wage will soon be increasing to $10 as of Jan. 1, 2016."

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