Worker's tips at issue in wage bill

Legislation could mean a $3-an-hour pay cut

Posted: Thursday, August 03, 2006

WASHINGTON - Tip money earned by waitresses in Las Vegas, manicurists in Hollywood and bartenders in Seattle is on the table in the nation's capital as lawmakers scrap over an election-year minimum wage bill.

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Nevada, California and Washington are among seven states where workers get to keep their tips on top of getting paid their state's full minimum wage. In other states, tip-earning workers get paid less and make up the difference with tips.

A provision in GOP-written minimum wage legislation passed by the House and under consideration this week by the Senate could change the law in those seven states - the others are Montana, Alaska, Minnesota and Oregon. It would deal a pay cut of $3 or more an hour to thousands of waiters, bellhops and hairdressers in those states, according to Democrats and labor groups.

"Everything that has been achieved in seven states to support low-wage workers who earn tips is destroyed by this bill," said Sen. Dianne Feinstein, D-Calif. "This bill would slash the salaries of thousands of workers."


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Senate Minority Leader Harry Reid, D-Nev., called the provision a "travesty."

Republicans and the National Restaurant Association, which opposes a minimum wage increase and fought for the tip provision, dispute the Democratic interpretation. They say the legislation is only intended to have an impact when the states in question increase their minimum wage - at which point the increase would come out of a worker's tips, not an employer's payroll.

"No provision results in the lowering of wages for any worker. The purpose of the provision is to allow employers with tipped employees to count their employees' tips as wages for purposes of meeting their minimum wage obligation," Brendan Flanagan, a spokesman for the National Restaurant Association, said in a statement Tuesday after Democrats began raising concerns.

A memo by the nonpartisan Congressional Research Service on Wednesday backed up the Democratic position. Under the bill language, the seven affected states "would seem to be prohibited from enforcing the minimum wage rate provisions of their laws with respect to a tipped employee" said the memo, written by Jon A. Shimabukuro, a legislative attorney at the research service, for Sen. Barbara Boxer, D-Calif.

But in a letter to Senate Majority Leader Bill Frist, R-Tenn., a Labor Department official said the department would interpret the bill's language as protecting current wages for tipped employees in the seven states. Victoria Lipnic, assistant secretary of labor for employment standards, offered in the letter to work with lawmakers to clarify the intent of the legislation - something several Republican senators, including Norm Coleman of Minnesota, said Wednesday they intended to do.

The minimum-wage-increase legislation already was controversial because House Republican leaders passed it as part of a bill cutting inheritance taxes on multimillion-dollar estates, a top GOP priority opposed by most Democrats. The tipped-workers' provision looked likely to heighten Democratic opposition and could factor into decision-making by lawmakers who haven't yet made their position known, including Democratic Sens. Maria Cantwell and Patty Murray of Washington state.

The GOP package, expected to come to a vote Friday, would increase the federal minimum wage from $5.15 to $7.25 per hour, phased in over the next three years. States with higher state minimum wages - in California it's now $6.75 an hour; in Washington $7.63 - would keep their higher levels, at least until the federal level exceeds it.

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