By: Kevin M. Mosher, Esq.
Lest business owners, human resource professionals and attorneys believe their profession is without political intrigue, the Minnesota race for governor has served to educate the public over Minnesota's wage laws regarding tips since the 4th of July holiday. No longer an obscure law, Minnesota's minimum wage law has enjoyed the political spotlight since the Republican-endorsed candidate for governor, Tom Emmer, declared it in need of an overhaul - at least with regard to tipped workers. Although it was Emmer's gaffe that several employees at a St. Paul restaurant were making in excess of $100,000 because of lucrative tips, the issue has taken on seemingly political importance for the gubernatorial candidates with Democrats generally in favor of leaving the law as-is and Republicans seeking change.
The issue is one of a tip credit. Federal law (Fair Labor Standards Act) and the majority of states' wage and hour laws allow employers to pay certain tip-receiving employees a lower hourly wage, so long as the amount of money in tips that the employee receives is sufficient to raise the employee's overall hourly compensation above the minimum wage. Minnesota law, however, does not allow employers to credit an employee's tips received against minimum wage. As a result, Minnesota employers must pay at least the state's minimum wage ($6.15 for larger employers) for tipped employees. While Minnesota's minimum wage is below the federal minimum wage of $7.25, it is of little consolation when federal law would allow companies to pay tipped employees $2.13 per hour. The result is that employers must always pay at least the Minnesota minimum wage to employees who receive tips, which is great for tipped employees, but can be costly for Minnesota companies.
The issue of a tip credit is likely to resurface again in future legislative sessions. Given the political drama over the issue, it is likely that the Democrats will indirectly raise the issue legislatively by moving again to raise the minimum wage. Should Republicans regain a majority in the legislature and/or maintain the Governor's office, they would be expected to seek to create a tip credit. The issue has been heated and divisive in the past few years. In 2009, Governor Pawlenty went as far as to articulate the absence of a tip credit as the reason for his veto of legislation, which would have raised the state's minimum wage to equal or exceed the federal minimum wage. And while it is only July in a long political race for governor, given the recurrence of the issue legislatively, certain service-industry businesses employers may expect to see a substantive change in the Minnesota wage law as a result in forthcoming legislative sessions. Until then, enjoy the candidates and pundits discussing this nuance of wage and hour law as it is unlikely to enjoy so much attention again.
Contact any Wessels Sherman attorney in the Minneapolis office to discuss questions regarding this subject.
