Sumter, Caride, Egan and DeAngelo Bill to Increase the Minimum Wage for Tipped Employees Advanced by Assembly Committee

(TRENTON) – An Assembly committee on Monday advanced legislation sponsored by Assembly members Shavonda E. Sumter, Marlene Caride, Joseph V. Egan and Wayne DeAngelo that would raise the minimum hourly wage for tipped employees.

“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,” said Sumter (D-Bergen/Passaic). “It is time for New Jersey to catch up.”

“The minimum hourly wage rate for tipped employees has been stagnantly low for way too long. In an economy that has been slow to recover, it is imperative that we raise the rate for the sake of employees who rely on tips to supplement their income,” said Caride (D-Bergen/Passaic).

The bill (A-2708) would increase the minimum hourly wage that must be paid to employees that customarily and regularly receives gratuities or tips.

The bill 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.

“Workers who depend on tips are at the mercy of consumers. 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,” said Egan (D-Middlesex/Somerset).

“This is a matter of fairness and equitable pay,” said DeAngelo (D-Mercer/Middlesex). “Tipped employees in New York and Connecticut are earning more than twice what tipped workers are earning here in New Jersey. Let’s give these employees a better foundation to build from and increase their minimum wage.”

The bill would also require every employer, for every pay period and for every employee that customarily and regularly receives gratuities or tips, to provide substantial evidence that the amount claimed for the credit of gratuities or tips was received by the employee and that no part of the amount claimed was returned to the employer. Lastly, the bill would require that every employer provide notification to any employee for which the employer claims the credit of gratuities or tips.

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.

The Assembly is working to raise the minimum wage to $8.50. The bill (A-2162) to raise the minimum wage was advanced by the Assembly Labor Committee last month. If the minimum wage hike passes, this bill (A-2708) 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.

The bill was released by the Assembly Labor Committee.