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August 03, 2006
Would Minimum Wage Bill Shortchange Tipped Employees?

Democrats are voicing concern over a provision in a House-approved minimum wage bill that they say would force states to allow employers with tipped employees to count employees' tips toward the minimum wage, the Los Angeles Time reports.

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Under current federal law, tipped employees are entitled to the minimum wage, but employers are allowed to deduct a "tip credit" of up to $3.02 (resulting in a wage of $2.13 per hour) as long as the balance of the minimum wage is made up with tips.

However, in seven states--Alaska, California, Minnesota, Nevada, Montana, Oregon, and Washington--no tip credit is allowed.

The U.S. House of Representatives approved a minimum wage bill last week that included a provision that would prevent those seven states from enforcing their minimum wage laws as they apply to tipped employees, Democrats tell the newspaper.

"It's a devastating proposal," Seator. Barbara Boxer of California tells the newspaper.

In California, employers pay tipped employees the minimum wage of $6.75 per hour plus tips. Under the House-approved legislation, the state would have to allow employers to pay tipped employees $2.13 per hour, as long as the balance of the minimum wage would be made up with tips, says Senator Dianne Feinstein, a Democrat from California.

The newspaper notes that reports from the Congressional Budget Office and the Congressional Research Service seem to support Democrats' take that the bill would supersede state laws.

Last week, the House voted 230 to 180 to approve a bill that would increase the minimum wage in three steps. The minimum wage would increase to $5.85 per hour in January 2007, $6.55 per hour in June 2008, and $7.25 per hour in June 2009.

The bill has moved to the Senate. Besides the tipped-employee provision, Democrats object to the tax breaks to which the minimum wage legislation was attached.

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