NJ Bill to end tipped wage credits meets broad opposition

by Nikita Biryukov, New Jersey Monitor
April 10, 2025

A legislative proposal to eliminate an exemption for tipped workers in the state’s minimum wage law met with broad opposition from business groups, restaurateurs, and workers Thursday.

Opponents of the bill, which was presented for a discussion only before an Assembly panel and did not see a vote, said the plan would force business closures, price hikes, and cuts to worker compensation by requiring businesses to pay the full minimum wage to workers even if their tips bring their hourly pay above the wage floor.

“As I always say, New Jersey is extremely expensive. We want to be able to support our small businesses, but by raising the cost of eating out and tipping workers and providing livable wages to these workers, we’re making it nearly impossible to do so,” said Elissa Frank, vice president of government affairs for the New Jersey Business and Industry Association.

New Jersey law sets the wage floor for most workers to $15.49, but affords employers a $9.87-per-hour credit against those wages if tips bring worker earnings above that level.

The bill sponsored by Assemblywoman Verlina Reynolds-Jackson (D-Mercer) would phase that credit down — to $7.90 in 2026, $5.92 in 2027, $3.95 in 2028, and $1.97 in 2029 — before entirely eliminating it beginning in 2030.

Reynolds-Jackson said the bill is “about economic justice.”

“Every person deserves to make a decent wage, and people should be paid fairly for the work they do. Today’s discussion is the start of a broader conversation as this bill makes its way through the legislative process. We look forward to meeting with stakeholders all around the state about this important issue,” she said.

Restaurant owners and business groups cautioned that eliminating tipped worker credits would force restaurants to raise prices or cut hours and jobs to meet payroll.

Some opponents noted that 73 restaurants closed last year in Washington, D.C., which is on a path to eliminate its tip credit by 2027. There are more than 2,600 restaurants in the nation’s capital, according to the National Restaurant Association.

“We’ve seen employees lose their jobs because the labor costs have increased astronomically,” said Amanda Stone, vice president of public affairs for the New Jersey Restaurant and Hospitality Association. “They’ve gone to areas outside of the district to continue being able to make a tipped wage. We’ve seen the real impact this can have right in D.C., and we can’t afford to do that here.”

Some workers themselves cautioned against a higher minimum wage, saying they had foregone promotions to management positions because of the additional earnings brought by tips. Others noted tips brought compensation for many to levels that far exceed the state’s wage floor.

“[I] went to school for hospitality and worked my way up into management. I’m back to bartending. I have always made more than minimum wage in service positions. They pulled my payroll, most recent pay period, I earned $44.42 an hour,” said Tricia Abbondanzo, a longtime restaurant worker. “This is not a minimum wage job.”

One witness supported eliminating tip wage credits over concerns about wage theft. A 2017 study from the Economic Policy Institute, a left-leaning think tank, examining wage theft in 10 states found 17% of tip workers experienced some form of wage theft.

Wage theft can take different forms. In New Jersey, it can include employers taking a portion of tip pools or requiring their workers pool tips.

“The tipped industries have some of the highest rates of wage and hour violations behind only private residence domestic workers,” said Peter Chen, senior policy analyst for New Jersey Policy Perspective.

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