Minimum Wage and the Tip Credit in Minnesota: Nothing is Simple
As we recently discussed, there is newly proposed minimum wage legislation in Minnesota. Such supposedly simple legislation can bring legal complexities and unintended consequences for Minnesota employers given its interaction with other laws.
One case in point is the implication to Minnesota hospitality industry employers (a very significant share of the state economy and an industry with traditionally narrow profit margins) because Minnesota does not have a “tip credit” law. In 43 other states and as allowed by the FLSA, a tip credit can be applied to a portion of an employer’s minimum wage obligations. Minnesota law, however, prohibits application of a tip credit to either the federal or state minimum wage.
Many hospitality industry employers argue that a minimum wage increase in Minnesota will have the unintended negative effect of increasing the cost of certain “minimum wage” tip-earning employees who actually earn far in excess of minimum wage by earning tips in a “no-tip credit” state. This increased cost, they argue, will be at the expense of the non-tip earning employees and, ultimately, the consumer. Some hospitality industry employers are strongly opposing the increase or proposing a tiered minimum wage system to offset unintended consequences. Some hope for tip credit legislation – although that may be a remote hope. A good discussion of the ongoing debate is found on the Minnesota Public Radio website.
Takeaways: Nothing is simple! Minnesota employers should stay current on the state and federal minimum wage legislation proposals and project their implications to their own labor force in light of the many other laws relevant to lower-wage workers.