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As Minimum Wage Rises, More NY Restaurants Drop Tips for Surcharges

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The surcharges offset increased labor costs.

Flickr/Dave Dugdale

Restaurants in New York may be feeling a pinch after the state raised its minimum wage for tipped workers at the end of last year. Governor Andrew Cuomo pushed through an increase from $5 to $7.50, and now, reports the Rochester Democrat & Chronicle, more restaurants are doing away with tipping in favor of surcharges to make up the cost.

A recent receipt from a restaurant in Geneva includes an "NYS Labor Surcharge" of $4.32 on a $91 tab. That follows a similar move by a brewpub in Glen Falls, which explicitly banned tipping and instituted a 18 percent surcharge last month. In an open letter to customers, the owners of Davidson Bros. Brewing Company said the move was necessary to "provide every employee a fair wage" while "saving our guests over $200,000/year."

These restaurants aren't close to being the first to ban tipping. Union Square Hospitality Group restaurateur made a big splash by getting rid of tips at his restaurants last year, and Joe's Crab Shack became the first major chain to test the policy. But, those decisions were more proactive than these latest developments. In its open later, Davidson Bros. said the new minimum wage may lead to human workers replaced by computers.

"This unaffordable cost benefitting only some workers is the primary reason an increasing number of restaurants are eliminating tipped employees, in many cases replacing human beings with computers and tablets. "

Last year, a report from financial services firm Cornerstone Capital Group agreed with the point that employees may be traded in for software and robots at chain restaurants. The report pointed to three key factors: volatile food prices, the consequences of the Affordable Care Act,€” and income equality that is "increasingly a point of social and political contention." It would seem New York restaurants' complaints fall under the third category.

Automated ordering with no person in sight may seem like something out of a dystopian future, but it's already a reality. Many airport restaurants employ touchscreen tablets that allow customers to place orders and pay their checks, as do some national chains such as Panera Bread and Applebee's. Although, that trend hasn't made much of an impact in the non-chain restaurant market.

Regarding the surcharges, as opposed to increasing menu prices, the Democrat & Chronicle notes they appear to be a perfectly legal response to the new minimum wage.

"The [Attorney General] or the Department of Labor may take a different position, but I would be interested to know what the basis would be for saying it's an unlawful charge to make," Joe Carello, an attorney specializing in labor and employment law, told the paper. "I am not aware of any type of litigation involving this [type of issue]."

This story has been updated to correct Cornerstone Capital Group's assessment that volatile, not increased, food prices may contribute to a reduction in human labor.