Proposed Changes to Tip Credit System Spark Outcry from New Jersey Restaurateurs

A bill that would eliminate New Jersey’s tip credit system has sparked strong opposition from restaurant owners, who warn it could have dire consequences for the industry. The legislation, introduced by Assemblywoman Verlina Reynolds-Jackson, seeks to phase out the current system that allows employers to count tips toward the minimum wage for tipped employees. Under the current law, tipped workers such as servers and bartenders earn an hourly wage of $5.62, but their tips are factored into meeting the state’s mandated minimum wage of $15.49 an hour. Employers are legally required to make up the difference if workers do not earn enough in tips.
The bill’s critics, including members of the New Jersey Restaurant and Hospitality Association, argue that tipped employees already earn more than the minimum wage on average. They warn that eliminating the tip credit system would lead to higher labor costs for restaurants, potentially causing price increases for customers and driving many businesses to close. A similar policy change in Washington, D.C. resulted in widespread job losses and restaurant closures. The proposed changes also apply to workers in beauty salons who rely on tips for services. As lawmakers debate the bill, protests were held outside the Statehouse by restaurant owners, workers, and supporters urging the legislature to reject the measure.