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MN House OKs Wage Tier for Tipped Employees

Following several hours of debate Tuesday, March 24, the Minnesota House voted to approve a change in the minimum wage laws that would recognize tips as income.

Under the new tipped employee tier, employees, such as restaurant servers, who earn at least $12 per hour including tips would have their base wage capped at $8; those not reaching $12 an hour in the two-week pay period would make the full state minimum wage. Lawmakers approved a state minimum wage increase package last year, with the first bump last August to $8 an hour. This August it will rise to $9 an hour, then to $9.50 by 2016. The next move in 2018 indexes yearly wage increases with inflation.

The bill, authored by Rep. Pat Garofalo (R-Farmington), passed by a tally of 78 to 55, with seven DFL members joining 71 Republicans to approve it. Garofalo previously said he supports the proposal because it’s beneficial both to business owners and workers, and is “a matter of fairness and a matter of common sense.”

“The unintended effects of our current law are we mandate a pay raise for the employees who sometimes are already the highest paid,” said Garofalo in a February interview.

The measure is championed by the Minnesota Restaurant Association and many restaurant owners who say being forced to raise wages for all employees would push them to raise prices, cut employee hours or perhaps move to a fast-casual service model that would eliminate table service, as owners are already dealing with low profit margins and increased food costs.

Several amendments were also adopted:

•A requirement to provide information about the new tipped wage in writing to all current and new employees.

•Deletion of a provision that excluded employees working under a collective bargaining agreement from the new tipped wage.

•A change from “pay period” to “workweek” as the time over which the average total earnings for a tipped employee are calculated.

•The “Davnie” amendment, which repeals the rule allowing employers to pass the processing fee on payment card tips to employees.

•The repeal of a 2014 minimum wage provision for international student workers at resorts.

•A provision regarding sexual harassment, which disqualifies an employer with three or more findings of probable cause by the Department of Human Rights from using the new tipped wage.

In an email to members, the restaurant association said the next step is for the bill to be included in the larger omnibus jobs package, which is expected in late April.

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