August 03, 2006

More About that Minimum Wage Scam

When I wrote about the minimum wage scam the Republican House pushed through this week, I hadn't understood the full depth of their scam. This is truly a poison-pill bill designed to force some of the progressive states (and cities who have passed living wage laws) to give tax cuts to employers who hire employees who also earn tips AND cap the earnings of those workers or to cause those workers to be completely excluded from those covered by minimum wage regulations. Here's a rundown of the bill:

  • Seven states - Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington - do not allow employers to take a tax credit for the tips earned by workers to reach the minimum wage threshold.
  • In these states, a worker is paid a minimum wage and the tips are then added to their earnings. Employee earnings = full minimum wage + tips. If the minimum wage is $7.50 per hour and the employee averages $2.00 per hour in tips, then the employee takes home $9.50 per hour. The employer is responsible for paying the full $7.50 (no credit).
  • In states where this law is not in place (or only partially in place), the amount an employer pays can include a deduction for the tips of the employee to reach minimum wage. In this case, using the same numbers as above leads to the following: employee earnings = $5.50 + $2.00 = $7.50 or minimum wage. Employer takes a $2.00 per hour tip credit for each of his workers and employees are paid $2.00 less.

Here's EPI's explanation:

In most cases, the tipped employees would be subject to the federal minimum wage law, which allows employers to pay as little as $2.13 an hour and to rely on customers’ tips to make up the rest of the $5.15 minimum wage. This is known as a “tip credit.” Thus, in Washington, tipped employees would see their minimum wage cut from its current $7.63 an hour (plus tips) to $5.15 an hour (including tips). Employers would see their minimum wage obligation to tipped employees fall by $5.50 an hour—from $7.63 an hour to $2.13 an hour (assuming $3.02 in customer tips). For example, an employee who is currently paid the state minimum wage of $7.63 an hour and receives $3.02 in tips earns a total of $10.65 per hour. Under the House-passed bill, the employer would be permitted to pay only $2.13 an hour and count the customers’ tips to make up the rest of the $5.15 federal minimum wage. The employee would lose $5.50 per hour in pay.

This bill would affect over 1 out of 5 workers that earn tips. (See here for the numbers - data courtesy of Senator Kennedy's office.)

So the sheer devilry of this bill is crystal clear. States that haven't given companies a tip credit will be forced to give that credit (both a tax cut for the employer and a real wage cut for the worker) or these workers will be stripped of their right to be paid a minimum wage at all. So why do Republicans hate ordinary American workers?

Let your Senators know that you are against this bill. It is truly an outrageous travesty.

Posted by Mary at August 3, 2006 12:05 AM | Economy | Technorati links |
Comments

Why are tips an issue concerning minimum wage? Tips are income that belongs to the employee they were given to. Tip income is no different than, income from a second job, income from child support, income from gambling winnings, income from inheritence, income from a legal settlement and yet tips are being singled out as income that employers may use to pay their minimum wage obligations. Why?

The truth is, employers are being allowed to take their workers tips with legisalation allowing businesses to pay tipped workers lower wages.

When employers are allowed to pay employees who receives tips lower wages, not only are employers being allowed to indirectly take their worker's tips, employers are, in effect, allowed to defraud the consumer. Consumers are tipping to benefit the employee, not the employer. However, when employers are allowed to reduce the wages of an employee simply because that employee has received tips from the public, the consumer's tip fraudulently becomes savings and subsequently benefits for the employer. When employers are allowed to pay workers lower wages simply because consumers are tipping them, what was intended for the benefit of the employee becomes financial benefits for the employer.

Imagine receiving $50 dollars in tips only to find out that your employer has been allowed to reduce your hourly wages by $40 a day because you received tips. While you will go home with only $10 more than minimum wage for that day's work, your employer will go home with an additional $40 in profits for himself due to the fact our government is allowing employers an ability to steal the finacial benefit of their worker's tips. Instead of benefiting you, the consumer's tips have benefited your employer. Is this not fraud on the consumer? Is this not stealing from the employee?

While our federal government clearly has the authority to set minimum wage at a higher or lower rate, they should not be setting minimum wage lower for workers simply so businesses can attain property that is not intended for them. You see, employees who receive tip income have been singled out as workers who should not be paid minimum wage on the basis that they receive additional income from consumers. It is a violation of not only federal law, but state law, for employers to take any part of an employee's tips. California's laws explain that the law prohibiting employers from taking their worker's tips has been passed to protect the public from fraud. If employers where allowed to take their employees tips when consumers are undeniably attempting to bestow them on certain workers, clearly it would constitute fraud on the consumer. Just as it is fraud for anyone running a charity to take the charitable contributions for themselves, it would be fraud for businesses to take the tips given their workers.

Our government, by passing a bill which allows businesses to reduce the wages of employees who receive tip income, has inadvertently allowed businesses an ability to steal their worker's tips.

Imagine working in a restaurant where you receive $40 in tips every day. Now imagine your employer being allowed to reduce your hourly wages by $40 a day because you received tips.
It's exactly like payroll deductions for charitable contributions. My employer, for instance, offers us an opportunity to give to charitable organizations through two methods. We may give cash directly to those collecting for certain charities or we may have a set amount deducted from our paycheck for certain charities. Whether we elect to give directly to the charity or whether we elect to give through deductions from our paycheck, our money is going to the charity.

When employers are allowed to reduce the tipped workers wages because he has receive tip income, employers are actually allowed to take their employee's tips through paycheck deductions. While the employee's tips are not directly being taken, the worker's tips are indirectly being taken. It should not matter whether employers are taking their employee's tips directly or whether employers are taking their worker's tips indirectly, for in both cases the employee's tip are undeniably being stolen.

Our government's attempts to give relief to small business owners is commendable to the extent that they do not violate the law. The tips credit, which was introduced in an effort to provide relief to small business owners has allowed business owners an ability to steal their worker's tips. While I applaud efforts to help small businesses, I am appalled by the fact that our federal government is allowing businesses an ability to indirectly steal their workers tips. Consumers are not tipping so that business owners can pay their workers less in wages, save money, and financially benefit themselves to the consumer's tip. The tip credit is fraud on the consumer and an injustice to those workers who receive tips. While consumer's are attempting to bestow additional income on employees of their choosing, our government has passed a law giving over the financial benefit of the consumer's tip to business owners.

The tip credit must be repealed on the grounds that it is not only fraud on the consumer but an injustice to the workers. The tips consumers present to certain workers in the service industry are being turned into financial benefits for business owners. Please note that employers are currently and will continue to solicit tips from the public now that our government has allowed businesses an ability to steal the consumer's tip for themselvves. Look at all the tip jars that have popped up over the last several decades. The reason business are putting out tip jars, is because our government has passed a law which, despite it's good intentions, does nothing more than allow business owners an ability to benefit themselves to the consumer's tip.

Posted by: George at August 9, 2006 12:25 PM

In a recent vote in the Senate, four Democrats joined 52 Republicans in a vote to expand the federal tip credit to all states. The tip credit is a law passed back in the 1960's which establishes a $2.12 minimum wage for all workers who receive tip income. Since state laws may be stricter than federal law, seven states have opted to require employers to pay tipped workers $5.15 an hour instead of the federal rate of $2.13 an hour.

The question that remains is, Why are employers being allowed to pay tipped workers less in hourly wages? The public is obviously tipping them to increase their earnings and yet our federal governement is attempting to decrease their earnings. Why?

The tip credit was passed for one reason and one reason alone. Business owners want an ability to steal their worker's tips. Imagine working in a restaurant where you receive $40 in tips every day. Now imagine your employer being allowed to reduce your hourly wages by $40 a day because you received tips. Who is benefiting from the $40 consumers gave you? You will go home with nothing more than what you would have gone home with had customers not even tipped you. Your employer, on the other hand, saw a reduction in staffing costs and as such the consumer's $40 tip became savings for the employer and subsequently direct profits for the employer.

Our government seems to think that, despite the fact customer's have given you $40 in tips, you should only be paid minimum wage. Why would they not want you to actually have the $40 that was given you? Why are their efforts clearly directed at depriving you of the additional income consumer's have attempted to bestow on you?

Our federal government has passed a law that blatantly allows businesses an ability to steal their worker's tips. Instead of openly allowing employers an ability to steal their worker's tips, our government has devised a means by which employers can indirectly steal their worker's tips. Instead of taking their tips directly, employers may deduct part of the employee's tips from his paycheck. While you may have been given $40 in tips, our government has figured out a way to allow employers an ability to steal your tip. Our government has passed a bill that allows employer an ability to reduce your wages by as much as $40 a day. What this means is that if you receive $40 or more in tips every day, your employer can steal them by reducing your wages by $40.

Not only should the 56 senators who voted to expand this corruption to all states be voted out of office, they should be arrested and tried on charges of conspiracy to commit fraud. The consumer's tips are not intended for the finacial benefit of business owners, and yet the tip credit, which these senators are so eager to expand to all states, fraudulently gives over the finacial benefit of the consumer's tip to business owners.

If I am wrong in my assertion that these senators are conspiring to defraud the public, then why are public's tips in many cases not benefiting the workers to whom they have been given? Allowing business an ability to reduce a tipped workers wages is no different than allowng businesses an ability to steal their worker's tips. If a group of senators were caught attempting to pass a law that would allow the organizers a charity to steal the chartiable contriubtions for themselves, those senators would be tried on charges of conspiracy to commit fraud. Why are these senators, who so blatnatly attempt to write laws allowing businesses an ability to steal their worker's tips, any different?

Posted by: George at August 9, 2006 01:39 PM

Mary, you stated:
"Under the House-passed bill, the employer would be permitted to pay only $2.13 an hour and count the customers’ tips to make up the rest of the $5.15 federal minimum wage. The employee would lose $5.50 per hour in pay."

Doesn't that mean that employers may steal the tips consumers have presented in an effort to increase the employee's earnings so that the employer may use the consumer's tip to pay the employer's minimum wage obligations? How can the employee lose $5.50 in pay, when his pay is only $5.15 an hour? Clearly the employee is losing something more than just his pay. The employee is losing his tips. Employers are being allowed to steal the employee's tips and there is no two ways about it.

Customers are being forced to pay the business owner's minimum wage obligations. Tips are being changed from what was intended to increase the worker's earnings into money that is now going to increase the business owner's earnings. When employers are errantly allowed to utilize the consumer's tip to reduce their payroll expenses, the consumer's tip fraudulently becomes finacial benefits for the business. Clearly, if consumers are tipping to increase the earnings of a worker and a third party is changing that money into earnings for business owners, the third party is guilty of fraud.

The third party in this instance is our federal government who, without any consent from the public, is giving over the financial benefit of the public's tips to business owners.

America, please sit up an take notice one time in your life. Our federal government has become openly corrupt to the point where they will allow those who are willing to pay them enough an ability to steal other people's property. The tip credit which was passed back in the 1960's and which currently our government elected officials are attempting to expand to all the states of the union is nothing more than a bill passed to allow businesses an ability to steal their worker's tips. We cannot sit back and let our government become openly corrupt. I love my country and yet it breaks my heart to see what the public's disinterest is allowing our country to deteriorate into.

Imagine minimum wage increasing to $10.00 an hour while employers are still allowed to pay tipped employees $2.12 an hour. It will mean that the first $8 in tips that an employee receives every hour will not be benefiting the employee but instead will be benefiting his employer. The employer will be allowed to utilize the first $64 an employee receives during an 8 hour work day to pay the employer's minimum wage obligations. What this will mean to consumers is that if they do not tip an employee more than $64 during the 8 hours he is working, the employee is going to go home with nothing more than he would have had he not received any tips from the public. You see, if customer's refuse to tip the employee, his employer must still pay him $10 an hour. That is the law. If consumers do not tip the employee more than $64 during his 8 hours of work the employee will benefit nothing from the tips consumer's are presenting him.

How can such happen in our country? The public is giving workers tips and yet the workers are not actually getting all the money. The way things are going, it will not be long until the workers are getting nothing from what consumer's are attempting to give them. It is fraud, plain and simple and you have your government to thank for it. Your tips are becoming just another fraud for business owners to perpetuate against the consumers of our nation.

What must be done?

The public must speak out against the federal tip credit which so blatantly allows businesses an ability to steal the consumer's tip for themselves. Are you really tipping workers so the business can save money and increase their profits? That is exactly what the tip credit is doing. Not only will such blatant corruption disintegrate the very moral fiber of our society, it will invite businesses to solicit tips from the public for the sole purpose of defrauding the public.

Imagine tip cups being put out in department stores, grocery stores, banks, 7 Elevens, automobile repair shops, and all the other business around the country. The tip credit is a law that is inviting businesses to solicit tips, for it has changed tips into business revenues. All businesses would understantable love to be able to pay their workers $2.12 an hour. The tip credit makes their wishes come to life. All they have to do is convince the public that their workers should be tipped too. Look at Starbucks. Look at Dunkin Doughnuts, Look at flourist shops. Businesses across this country are begining to realize that the tip credit is simply a means for businesses to defraud the public. While the public is led to belive that they should tip workers to increase worker's incomes, businesses are fraudulently utilizing the money presented as a means to lower their worker's incomes and increase the business owner's income.

Posted by: George at August 15, 2006 02:55 PM

As if that weren't bad enough. Steve Wynn of Las Vegas is now taking a portion of his dealer's tips to give his floor supervisors a raise. Apparently the legal eagles say that this is legal. So much for justice for all. Enough money and clout sure can dress up plain old theft.

His dealers are the highest paid on the strip and stand to lose between 10K and 20k per year. Mr Wynn pays his dealers near the minimum wage but assumes ownership of their tips as he's able to arbetrarily decide how to distribute them among his dealers and managers. His managers make about 65K in salary per year.

These particular dealers may be able to live with the change, but there are many of us in the business that make substantially less than they do. This sets a precedent that threatens the lively hood of tens of thousands in Las Vegas alone.

Posted by: Mori at August 30, 2006 07:04 PM

I am not able to locate the case of Olk V.US that Wynn is using as his justified position for taking a portion of his employees tips and redistributing them to salaried management postions. Can anyone offer where I am able to read this entire ruling? It occurred over 30 years ago.

Posted by: Lynne at September 1, 2006 09:19 AM