On December 31, 2019, Governor Andrew M. Cuomo announced that he had directed the New York State Department of Labor (NYSDOL) to eliminate the subminimum wage for tipped workers of all employers covered by the Minimum Wage Order for Miscellaneous Industries and Occupations. The governor’s announcement came on the heels of a recently released NYSDOL report that found that wage underpayment in the tip system disproportionately affected women, minorities, and immigrants. Employers that fall under this wage order include nail salons, hair salons, car washes, parking garages, tow truck companies, pet groomers, and tour guide agencies. The order impacts over 70,000 employees in New York.

New York State law allows employers in certain industries to apply a credit to pay their tipped employees a rate below the state’s minimum wage, with the expectation that tips will make up the difference to meet the state’s minimum wage requirements. Employers are responsible for paying the difference if the tips do not equal or exceed the minimum wage.

In accordance with an NYSDOL order modifying the Wage Order for Miscellaneous Industries and Occupations, on June 30, 2020, the applicable tip credit will be cut in half. On December 31, 2020, the tip credit will be completely eliminated and employers within the covered industries will be required to pay affected employees at least the full minimum wage.

Covered employers may want to consider how to implement the wage payment change in their workforces, and how it may affect their businesses moving forward. It is important to note that hospitality industry employers (such as hotels, restaurants, and bars), which are subject to the Hospitality Industry Wage Order, are not affected by this change and may still apply a tip credit to employee wages.