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NJ’s Tipped Workers Make $2.13 An Hour, But That Could Soon Change [AUDIO]

You might be shocked to learn that the minimum wage for tipped employees in New Jersey is just over two dollars an hour.

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Yesterday, the Assembly Labor committee advanced a bill sponsored by Assembly members Shavonda Sumter, Marlene Caride, Joe Egan and Wayne DeAngelo that would raise the minimum hourly wage for tipped workers.

Restaurant owners say the increase is not only a job killer, it’s also totally unnecessary.

The legislation would provide that: after June 30, 2012, an employer may claim a credit for gratuities or tips received by an employee against the hourly wage rate paid to the employee in an amount not to exceed 60% of the minimum hourly wage rate required by law; and after June 30, 2013, an employer may claim a credit for gratuities or tips in an amount not to exceed 31% of the minimum hourly wage rate required by law.

By allowing the employer to claim these credits, the bill would effectively require employers to compensate their employees at an hourly rate of at least 40 percent of the minimum wage ($2.90 per hour) after June 30, 2012, and an hourly rate of at least 69% of the minimum wage ($5.00 per hour) after June 30, 2013 and beyond. The remainder of the employee’s compensation may be comprised of tips or gratuities, as long as the employee earns at least the current minimum wage required by state and federal law ($7.25 per hour). Most employees who rely on tips or gratuities are currently paid the federal minimum wage for tipped workers of $2.13 per hour.

“The minimum wage for tipped workers in New Jersey is $2.13 per hour, a paltry sum that has been frozen for more than 20 years and is lower than most states, including all of our surrounding states,” explains Sumter. “It is time for New Jersey to catch up.”

Restaurant and bar owners say the profit margin is already too thin and if the wage increase goes into effect they might have to scale back employees’ hours or hire less workers.

George Ebinger owns several IHOPs and is the immediate past president of the New Jersey Restaurant Association. He warns that a minimum wage hike for tipped workers would surely increase your restaurant and bar tabs. All prices will need to go up to cover the additional costs and there isn’t much left on bottom lines to take it out of the business.

“The only thing I would be able to do is reduce operating hours which would, indeed cut hours for people working which defeats the purpose of raising wages,” explains Ebinger. “I support wages going up (but) we don’t have a need for a minimum wage bill for tips. It’s already there……Anyone who falls below the minimum wage ($7.25 an hour) makes make-up pay. That’s cash into their check that the employers are required to do to meet minimum wage.”

Currently, State law requires that a tipped employee’s hourly wage combined with tips must equal at least the minimum hourly wage rate of $7.25 per hour. New Jersey is one of the few states with no set minimum hourly wage rate for tipped employees. Instead, New Jersey follows the minimum set by federal law that requires a minimum hourly wage rate of $2.13 per hour for tipped employees.

“Workers who depend on tips are at the mercy of consumers,” says Egan. “Not everyone is nor can afford to be a good tipper. Raising the minimum hourly wage for these employees ensures they are taking home an adequate paycheck to provide for themselves and their families.”

Restaurant owner Francis Schott says, “I’m not crying wolf. This is a job killer. There are many, many marginal restaurants in this state and this is a huge expense because we employ so many people.”

“We applaud the New Jersey Assembly Labor Committee’s leadership in moving to fix this unfair loophole, which is a big part of the reason tipped workers have triple the poverty rate of the workforce as a whole,” says Christine Owens, Executive Director of the National Employment Law Project. “More than 70% of tipped workers are women. So fixing the tipped minimum wage is also a key step for gender equity and helping working women in this tough economy.”

Democrats in the legislature are also working to raise the minimum wage to $8.50. The bill to raise the minimum wage was advanced by the Assembly Labor Committee last month. If the minimum wage hike passes, this bill would raise the tipped wage to $3.40 in the first step, and up to $5.10 once it gets up to 60%. That would put New Jersey well ahead of Pennsylvania, Delaware, Maryland, Massachusetts, and Rhode Island; slightly ahead of New York; and slightly below Connecticut.

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