On March 24, 2014, the New Jersey Assembly Labor Committee advanced a bill (A857) that, should it become law, would raise dramatically the state’s minimum wage for tipped workers.  Currently, New Jersey employees who receive tips or gratuities must be compensated at no less than the minimum federal tip credited hourly wage of $2.13.  Under the framework proposed by A857, the tip credited hourly wage in New Jersey would increase in two phases—first to 40% of the state’s regular minimum wage on December 31, 2014, and then to 69% one year later.  At New Jersey’s current regular minimum wage of $8.25 per hour, the increase proposed by A857 would result in an initial tip credited minimum wage of $3.30 per hour, which would jump to $5.69 per hour the next year.

But the increases would not stop there.  Just last year, New Jersey voters approved a constitutional amendment that not only increased the state’s regular minimum wage to $8.25 per hour, but provided for annual adjustments each September 30th based on the Consumer Price Index (“CPI”).  As such, the state’s regular minimum wage may increase again later this year and, because the tip credited minimum wage proposed by A857 is calculated as a percentage of the regular minimum wage, it also would be subject to annual adjustments.

Of course, the recent regular minimum wage increase already has affected employers with tipped employees.  If the gratuities received by a tipped employee combined with the employer’s direct (or cash) wages of at least $2.13 per hour do not equal at least the regular minimum wage, the employer must make up the difference.  The recent increase in the regular minimum wage (without a corresponding increase in the tip credited minimum wage) actually widened this potential gap.

For now, the proposed increase to the tip credited minimum wage may face an uphill battle given the potential for opposition from the restaurant and hotel industries.  In addition, Governor Christie’s past veto of similar legislation suggests that the bill could be a dead letter.  We will continue to monitor A857 and share any developments.