In July, we wrote about a class action against Houlihan’s restaurant in which servers challenged the restaurant’s tip pooling policy as illegally sharing tips with non-servers. While that action is pending, a New York restaurateur has announced that he will eliminate all tipping in his restaurants, raise his workers’ hourly wages, and significantly raise prices to make up his loss. In a similar move, a New York City Sushi restaurant recently banned tipping, and is reportedly paying its employees a salary, plus benefits.  Following this apparent trend, the national chain of Joe’s Crab Shack just announced in November that it will be implementing a no-tipping policy, and that is will raise its servers’ wages to a starting rate of $14/hour, although this amount will vary from server to server on the basis of their past performance, according to the chain’s parent company, Ignite Restaurant Group.

The good news for employees is that a no-tipping policy guarantees all servers equal pay of at least minimum wage (currently $7.25 nationally and $8.38 in New Jersey), as compared to the lower wage ($2.13 in New Jersey and nationally) that most states permit to be paid to employees that receive at least $30 per month in tips. However, what is less clear is whether or not the increase in the tipless servers’ hourly wage will be sufficient to make up for their loss of tips. In other words, does a no-tipping policy tip in favor of employees or employers?

Rather than leave the answer to this question up for debate, a better solution would be to level the playing field by passing national wage parity for tipped workers, as already exists in seven states, and one territory. California, Minnesota, Montana, Washington, Oregon and Nevada, Alaska and Guam currently require employers to pay tipped workers full state minimum wage before tips. Not only does this result in fairness to servers, but these states also benefit from this approach, having higher sales per capita, higher restaurant job growth and some also having higher tipping rates. (Source: Restaurant Opportunities Centers United Fact Sheet: “The Impact Of Raising The Subminimum Wage On Restaurant Sales And Employment”). Perhaps the movement towards eliminate tipping will wake up the rest of the country to realize that the solution is not to eliminate tipping, but rather, to eliminate the tipping minimum wage.

By Francine Foner, Esq. and Ty Hyderally, Esq.

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