NJ Bill to Eliminate Tip Credit – What Restaurant Workers Need to Know

A bill introduced in the New Jersey state legislature has both restaurant workers and owners engaging in hot debate. The A5433 NJ bill would force a major shift in how tipped workers are paid.

Whether you are a restaurant owner or an employee, you should be aware of the changes that could occur if this bill passes. We take a deeper dive into the issue here. Read on to learn what the bill says. Plus, learn more about its pros and cons, so you can stay informed.

We also lay out how this pending legislation could affect wage and hour rights for restaurant workers. It’s possible employees could face wage restructuring, retaliation, or job loss. It’s good to know that there are employment attorneys like McOmber McOmber & Luber to help you if your rights are violated.

What Is Bill A5433 and Why Is It Making Headlines?

Bill A5433 was introduced to the New Jersey Statehouse in March by Assemblywoman Verlina Reynolds-Jackson. It proposes a major change to NJ tipped wage law, which Reynolds-Jackson feels would bring more economic justice for low-paid restaurant workers.

The current tip credit (explained more below) would be eliminated. Instead, employers would be required to pay all tipped workers the full state minimum wage. This is $15.49 per hour at present. Minimum wage would be paid to everyone, regardless of the tips they receive. All tips would then be in addition to the minimum. They would not be counted toward meeting the minimum wage, as they are now.

Understanding the Tip Credit: How It Works Today

At the moment, there is a tip credit NJ restaurants receive. Restaurants get a $9.87-per-hour credit if a worker’s earnings are equal to or more than the $15.49 hourly minimum wage with tips.

So, if you’re a waiter, bartender, busser, or host who makes at least $9.87 per hour in tips, the restaurant (your employer) only has to pay you $5.62 per hour (called the minimum cash wage) to make up the difference.

The bill would change that. Your employer eventually has to pay you the full minimum wage plus tips, making your hourly earnings much higher. The legislation proposes gradually phasing out the tip credit. The schedule below would be used to accomplish this:

• $7.90 in 2026
• $5.92 in 2027
• $3.95 in 2028
• $1.97 in 2029
• Tip credit eliminated in 2030

Testimony given in a hearing at the New Jersey Statehouse presented mixed views of the bill. It showed that while some restaurant workers struggle with lower wages, others often earn well above the minimum wage.

What the Proposed Change Would Do

Let’s look at some arguments for and against the bill.

For the Bill

Those supporting Bill A5433 say tipping is outdated. Many maintain it fosters wage theft, which is illegal in New Jersey.

While there are many servers at higher-end restaurants who enjoy good earnings through their tips, there are others who are financially vulnerable. Because these workers don’t make as much money through tips, the new pay schedule would ensure fair baseline pay for them.

Against the Bill

Many restaurants have been barely getting by in the 2020s, particularly since the pandemic. Restaurant owners say the new bill will destroy their already thin profit margins. They don’t feel that raising menu prices to compensate is feasible in the current economy. This could result in business closures, which hurt everyone.

Even if restaurants don’t go under, workers fear:

• Reduced hours
• Fewer shifts
• Decreased tip opportunities

Customers might also reduce their tips, believing that the minimum wage paid by the restaurant is sufficient. This is the custom in Europe, for example, where tipping is used to show appreciation and is not the basis of workers’ earnings.

Why the Restaurant Industry Is Pushing Back

Not surprisingly, the restaurant industry is against the passage of New Jersey Bill A5433. It brings multiple potential negatives for restaurants, such as:

• Reduced profits in a tight economy
• Accounting hassles to make the changes
• Possibility of reduced hours or closures

Some cities, like Washington, DC, are already on a path to eliminating the tip credit. They’ve experienced many business closures because of it.

What This Could Mean for You as a Tipped Worker

Are you a tipped worker in the restaurant industry? How would Bill A5433 affect your livelihood?

You might wonder, “Can I lose my job over the tip law change?”It largely depends on your earnings now.

If you are a relatively low-paid worker, getting rid of the tip credit would benefit you. You would probably earn more per hour in the long run.

However, if you currently make high hourly wages, the bill could impact your bottom line in a negative way. You may wind up making less per hour due to:

• Lower tips from customers who believe the minimum wage is enough
• Reduced hours as your employer struggles to maintain profits
• Role consolidation (combining two or more jobs into one)
• Business closure if the restaurant can’t survive a higher labor cost

If you work for an unscrupulous employer, you might even suffer retaliation for speaking up about wage laws and workers’ rights. This may include:

• Reduced hours and fewer shifts
• Assigned to poorly paying tables or shifts
• Demotion to a lower position
• Refusal to pay you according to the law
• Terminating your employment

Is this legal? Keep reading below to know your rights.

Legal Rights You Have If Your Wages or Hours Are Cut

There are three key rights you need to know if you are a restaurant worker, regardless of the success or failure of Bill A5433:

1. The New Jersey Wage and Hour Law protects you from underpayment. Your employer must comply with the state’s labor laws, even if it cuts into their profits.
2. You cannot be retaliated against for speaking out about wages.  Have your hours been slashed? Have you lost your job for making a complaint or for advocating for fair wages? That may be retaliation.
3. You have the right to speak with a lawyer if your rights in the workplace are threatened or violated.

How McOmber McOmber & Luber Can Help

If you believe your worker rights have been violated, it’s smart to consult with an NJ restaurant retaliation lawyer. McOmber McOmber & Luber can help make sure your rights are protected, especially if Bill A5433 passes. Our team assists you by:

• Helping tipped employees understand wage laws
• Fighting wage theft, retaliation, or unlawful termination
• Providing legal support during times of pay structure change

We have an excellent track record representing employees in New Jersey when it comes to employment disputes, wage theft, and other workplace violations. Our firm offers a free consultation, so you can see if you have a case. Then, we can work together to determine next steps.

If you’re a server, bartender, or tipped employee and are concerned about how New Jersey’s proposed wage law changes could affect your income or job, contact McOmber McOmber & Luber today. Know your rights before changes happen.

You can reach us at our Red Bank office at 732.842.6500, our Marlton office at 856.985.9800, our Newark office at 973.878.9040, our New York office at 929.566.1300, our Philadelphia office at (267).777.7800, toll free at 888.396.0736, or through our online contact form .