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Restaurant industry and tipped workers at odds on minimum wage

As we noted recently, there’s been a lot of discussion around raising the minimum wage, both in California, where Governor Brown signed an increase into law, and at the federal level, where such efforts have had less success. However, many employees who regularly receive customer gratuities are not paid based on the regular minimum wage. The good news for California’s tipped employees is that according to the U.S. Department of Labor, the hourly minimum wage in our state is the same as for non-tipped workers: $8.00. If you move to another state, however, you may be in for an unpleasant surprise.

Most states have two different minimums for tipped and non-tipped employees. Meanwhile, the federal minimum wage for tipped employees is just $2.13 per hour and has been since 1991. Therefore, if you’re working at a roadside diner instead of a posh eatery, your tips may not get you close to the state or federal minimum wage that other workers earn. It should be noted that federal law mandates restaurant owners to pay employees the difference between the federal tip wage and minimum wage if their tips bring them to that amount. However, many workers, out of fear of losing their job, are afraid to ask their employer to make up that difference.

Why is the federal “tipped wage” so much lower than its minimum wage of $7.25? Chalk it up to the restaurant industry. Restaurant owners argue that if they had to pay their waiters more, they would have to lay off people and raise prices. In response to restaurant industry persuasion, in 1996, Congress dropped the rule that the federal tipped wage could not be less than half the minimum wage.

Now, as President Obama and Democratic allies in Congress push to raise the federal hourly minimum wage from $7.25 to $10.10, they are not forgetting tipped employees. The proposed minimum wage legislation would increase their minimum by 95 cents each year, up to $7.10. Thereafter, it would be adjusted to keep up with inflation – something that hasn’t been happening.

While restaurant employees may hesitate to report managers who do not abide by wage and hour laws, it is important that business owners pay employees fairly. Whether it involves not paying minimum wage, misclassification of pay or other violations, employment attorneys work to ensure their clients are being paid in accordance with state and federal regulations.

Source: The New York Times, “Proposal to Raise Tip Wages Resisted” Steven Greenhouse, Jan. 26, 2014

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