June 9th, 2016
CONTACT: Tim Rusch,, 917.399.0236

Employers say increased liability, complications, and challenges arise from subminimum wage system


New York, NY —  Today, Restaurant Opportunities Centers United (ROC United) released “Tipped Over: Employer Liability in a Two-Tiered Wage State,” a report that examines how rules necessary to regulate the subminimum wage system, including the so-called ‘80-20 Rule,’ create tremendous liabilities for both employers and employees in New York State.

The report underscores that a ‘one fair wage’ system, in which employers pay all workers, including tipped workers, a full fair minimum wage, is necessary to ensure workers are properly paid, and employers are not placed at risk of unnecessary liability.

In particular, the study — based on interviews with 40 restaurateurs from New York and nationwide, as well as workers and attorneys —  highlights the significant monitoring and liability incurred by employers in order to ensure compliance with the necessary regulations associated with paying a subminimum wage, as well the increasing gap between a growing minimum wage and a decreasing subminimum wage for tipped workers. This pairing incentivizes employers to increase the workload of tipped workers by shifting tasks away from non-tipped workers. For many employers, tipped workers are now the considerably ‘cheaper’ workers whose wages did not increase. As a result, the number of class action lawsuits filed by workers with regard to violations of regulations associated with the subminimum wage has also increased. “Tipped Over” documents restaurant employers’ experiences of costly liability arising from the complicated rules surrounding paying tipped workers a lower minimum wage.

In April, New York passed legislation to increase the state minimum wage to $15 for everyone except tipped workers. Compared with California — a state whose restaurant industry is flourishing — it is clear New York State needs to change course.

ROC United Co-Founder and Co-Director, Saru Jayaraman said, “As the country moves toward establishing a minimum wage of $15 per hour, two paths have emerged. The first path is that followed by California, in which all workers are on a single track to earn a basic minimum wage of $15 per hour; the second path is exemplified by New York, which passed $15 minimum wage legislation, but reaffirmed a two-tiered wage system in which tipped workers which left out almost 400,000 tipped workers. New York should follow the lead of California and establish One Fair Wage for all, for the sake of employees and their employers.”

Amali Restaurant owner, James Mallios concurs: “As a veteran New York restaurateur, I know firsthand the negative impact of the subminimum wage system, on both workers and restaurateurs alike. One Fair Wage has done wonders for California’s restaurant industry. It can do the same for New York State.”

The stakes are high for tipped workers, who face disproportionate rates of poverty, discrimination and sexual harassment as a result of the subminimum wage system. Justine Daniels, a worker featured in the report, is a 23-year veteran of the industry, who is experiencing exhaustion and high blood pressure as a result of the increased load of non-tipped work being heaped upon her by her employer. She lamented, “I would say about 40% of my time is spent doing side work . . . closing shifts are always very draining, cleaning the place and glassware, sometimes it is 3:00am by the time all the work is done . . . there is no way they are going to pay me according to the ‘80-20 Rule’, $15 for 40% of the work I do, no way . . . I would like a One Fair Wage system.”

New York employers suffer greatly under the subminimum wage system as well, as it is difficult to enforce and properly comply with, and effectively puts them at a competitive disadvantage. Celebrity chef Tom Colicchio, a leader on the issue of access to healthy, affordable food, favors eliminating the two-tiered wage system not only for social good, but also because of the tremendous liability the subminimum wage creates for employers: “There’s a whole cottage industry of attorneys who are making their living off this two-tiered system…Do I think someone taking tips from servers to pay managers should be punished? Absolutely. But some of these attorneys are acting in their own self-interest. If we got rid of the lower minimum wage for tipped workers that would go away.”

In contrast, California employers do not have this burden. When California recently raised its minimum wage to $15 an hour, the wage increased for all workers, tipped and non-tipped, and thus no liability was imposed on restaurant employers, and no extra burden was imposed on tipped workers. Chris Williams, an attorney who specializes in legal issues related to low-wage industries, explains, “In California, the system is unambiguous and straight-forward; since employers in California can’t use the subminimum wage, they can’t violate it for time worked in a non-tipped occupation. None of the obligations that come from the subminimum wage and the liability that comes from not meeting those obligations apply to employers in California.” New York can follow California’s path and eliminate the costly liability experienced by employers by getting rid of the subminimum wage system.

The report’s key findings include:

  • New York employers face an extensive set of regulations with which they must comply, including (1) strict notification requirements of tip sharing procedures (“tip pools”) that must be signed by each tipped employee; (2) strict prohibitions on including non-tipped employees in a tip pool; (3) strict requirements that tips actually make up the difference between the minimum and subminimum wage each week); and (4) strict requirements that not more than two hours, or 20 percent, of any shift, whichever is less, is spent in performing non-tipped work, or work that is not related to direct service (the ‘80-20 Rule’).
  • Time and money spent monitoring compliance with the above regulations tied to the subminimum wage, such as the ‘80-20 Rule’, prevents employers from spending time training and even hiring new staff.
  • Employers face a tradeoff when concentrating on lawsuits or on hiring: while small employers are better equipped to handle ‘80-20’ by limiting the number of service staff, liability prevents them from growing. Large employers are particularly concerned with the burden of liability, at times dissuading them from making additional hires.
  • A survey of federal lawsuits filed in the Southern District of New York, covering the New York City (NYC) area, and in the Central District of California, covering the Los Angeles (LA) area, show that restaurant lawsuits made up approximately 23 percent of the total in the NYC area in a state with a two-tiered wage system, while making up only 8 percent of the total in the LA area in a state with no two-tiered wage system.

The release of “Tipped Over” coincides with a panel discussion today at 9:30 am at Amali Restaurant in New York City (115 E 60th St), featuring restaurant employers, attorneys, and workers who cite increased liability, complications, and challenges arising from the widened gap that was created between tipped and non-tipped workers as a result of New York’s $15 minimum wage law.


Co-founded by leading workers’ rights advocate Saru Jayaraman (“One of the top 50 most influential people in the restaurant industry” – Nation’s Restaurant News) ROC United has grown to 18,000 worker-members across over 15 states, in the US, winning 15 worker-led campaigns, totaling $10 million in stolen tips and wages.