Bare Minimum

Institute seeks to eliminate separate tipped minimum wage

By Claude Solnik
The Daily Record Newswire
LONG ISLAND, NY — Waiters and waitresses often welcome customers, radiating a positive attitude designed to provide good service and boost tips. The customer isn’t only right: The customer, really, is the one who compensates them.

If many of these workers are high energy, they have long worked in an industry where minimum wage doesn’t, really, apply.

In much of the nation including nearby New Jersey (and New York, until a few years ago), waiters often earn the federal tipped minimum wage of $2.13 an hour from their employer, a number that hasn’t changed since 1991.

“I was lucky,” said a woman who worked as a diner waitress on Long Island until recently, earning $5 an hour base pay. “I met people getting less than that in New York State.”

While many people assume tips pay much of a server’s salary, the sub minimum wage turns 50 this year. It’s not an anniversary that many waiters are likely to celebrate.

The Fair Labor Standards Act was amended in 1966, creating a “subminimum wage” and two-tiered system for tipped workers.

The tipped minimum has sunk to 29.4 percent of the regular federal minimum wage of $7.25.

In theory, and often in practice, tips raise waiters’ compensation well above minimum. But when it doesn’t occur, the server is often out of luck.

Restaurants under the FLSA are supposed to supplement tips to bring workers to standard minimum. But many restaurants estimate, rather than calculate, tips.

And waiters said businesses don’t typically supplement pay, if they earn below minimum due to slow days, storms or just a shortfall.

“Sometimes, it worked in my favor. If they said I should make $200 and I made $300; that was $100 the government didn’t know about,” the waitress said of her restaurant’s tip estimates. “If they said I pulled in $200 and I made $100, I got screwed that week.”

While the debate rages about raising the minimum wage, the tipped minimum has remained, if not a secret, an often unaddressed issue nationwide.

The federal tipped minimum remains $2.13 per hour, used as the base in 18 states including New Jersey, Alabama, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Nebraska, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Utah, Virginia and Wyoming.

Thirty-two states including New York and Washington, D.C. have a tipped minimum wage above the federal minimum.

New York raised its tipped minimum to $5.65 an hour in 2015 and $7.50 by 2016, still below the $9 state minimum.

“It creates a lot of instability in income. Tipping is affected by everything from the server’s appearance to the weather,” said David Cooper, a senior economic analyst at the Economic Policy Institute in Washington, DC. “Tipped workers of color will get lower tips than white workers for the same reported level of service.”

He believes servers are often economically vulnerable, turning them into an overlooked, potentially underpaid, group. “The tip workers tend to be women and younger than the rest of the workforce,” Cooper said.

Many tipped workers don’t know restaurants are supposed to supplement wages and servers are unlikely to raise that issue with supervisors.

“This is the person who determines their schedule, section of the restaurant they work in, if they keep their job,” Cooper continued. “It’s unrealistic to think any server will confront a restaurant about this.”

U.S. Department of Labor Wage and Hour Division audits found violations in 84 percent of roughly 9,000 full-service restaurants 2010-2012.

The U.S. Department of Labor in 2011 recovered $780,000 in back wages and damages for 40 employees of Mama’s Pizzeria and Restaurant, in Copiague.

Workers were required to work 70 to 80 hours many weeks without overtime compensation and were paid less than the federal minimum wage.

Cooper said some restaurants willfully underpay, but added that “the system is so opaque,” it’s sometimes “difficult for them to know if they’re following the law.”

The Economic Policy Institute is calling on states to eliminate a separate tipped minimum wage.

Eight states don’t have this lower “tipped minimum,” including California (with a powerful actors’ union), Alaska, Hawaii, Minnesota, Montana, Nevada, Oregon and Washington

“There are reasons that relying on tips for the majority of a worker’s income is bad,” said Cooper. “If you don’t know your income from week to week, it’s hard to budget and plan.”

In a 2014 report titled “Twenty-three years and Still Waiting for Change,” the Economic Policy Institute blames the FLSA for decoupling tipped minimum from minimum.

“Whereas tips had once been simply a token of gratitude from the served to the server, they became, at least in part, a subsidy from consumers to the employers of tipped workers,” according to the report.

The Fair Minimum Wage Act would raise the federal minimum to $7.25, gradually reaching $12, while raising the tipped minimum. “It would essentially do away with the lower tipped minimum wage,” Cooper said. “The bill didn’t pass.”

Roughly 1.4 million tipped workers are employed in states where with the $2.13 tipped wage is in place. Another 2.2 million tipped workers are in states with a tipped minimum between $2.13 and the standard minimum in those states.

In states where tipped workers get $2.13, 18 percent of waiters and bartenders –or nearly one in five – live in poverty.

In states where there is no separate tipped minimum, the poverty rate among waiters and bartenders is 10 percent, Cooper said.

“There are dramatically different economic conditions,” he continued. “It would be best for New York to do away with its lower tipped minimum wage.”

In addition to the tipped minimum, other problems drive down the non-tip portion of waiters’ pay.

“I would never get a break, but I was docked an hour a day that I worked. If I worked 25 hours, I got paid for 20 or 21,” the waitress said. “They said I was getting an hour long break that I didn’t get.”

She was docked pay for food she ate at the restaurant. “There was a small list of things I was allowed to eat,” she added.

A ten percent charge was taken out of her credit card tips, more than processors charge. “I was paying for their credit card processing,” she said. “I’ve heard other women say it happens. I’ve heard other waitresses walk out when that happens.”

By the time all charges and taxes were taken out, she said the restaurant’s portion of her paycheck shrank to little more than $1 per hour without tips.

“I rarely made more than $60 for the week, no matter how many hours I worked,” she said of the restaurant portion. “My gross would be $120. But I walked out with nothing.”

When New York raised the tipped minimum, that made things better, while creating new problems.

“The week that that happened, they started cutting everybody early. A shift that would last five hours lasted three and a half,” the waitress said. “I was making less in tips. They put fewer people on the floor. It was worse service. You had more tables.”

Some people who knew the minimum tipped wage rose suggested there was no longer a need to rely as much on tips.

“When I got my first raise, people started saying, ‘I guess I don’t have to leave you so much. You’re making more,’” the waitress said. “It’s still not minimum wage.”

Even with drawbacks and without security, some servers can do well, while others in restaurants with few customers struggle.

“It’s hit or miss,” the former waitress said. “If you make money, your employer makes money. If you have a bad week and don’t make money, your employer also is not making money.”

Tips still often come in the form of cash, so waiters end the day with money in their pocket.

“Bringing home a wad of cash makes you feel rich,” the waitress said. “Coming home with $200 cash at the end of the day is an awesome feeling.”