I posted last week on the issue of raising the minimum wage for tipped workers in New Jersey, but that State is not alone in these efforts. There are a number of these initiatives afoot and the effort in New York State is particularly significant. Although, at first blush, raising the minimum wage may sound like the “decent” or “humanitarian” thing to do, but the fact is there are a number of untoward consequences for the business community that should give legislators (some) pause when launching into these efforts in almost a blunder buss manner.

Democratic legislators are leading this push. Senator Daniel Squadron claims that the statute would exempt small and medium-sized businesses from the new wage level, but would force bigger companies to assist their workers in escaping what the Senator deemed their “crushing poverty.” A lawyer for the National Employment Law Project, which is pushing hard for the legislation, took the “rob from the rich and give to the poor” perspective. He opined that, as these large companies, i.e. McDonalds, are earning millions and millions in profits, they should be able to and, more importantly, ought to pay their workers more.

What would happen in actuality? If bigger entities raise their wages, there would be inherent pressure on smaller employers to raise their wages to keep pace and seek to attract better qualified workers. Larger companies would, however, marshal their arguments and forces and seek to avoid the application of the law, in order to avoid the large dollar liabilities the law would engender. This arises from the vagueness in the law as to coverage, such as what constitutes a large employer and what constitutes a formula retail store. These coverage issues by themselves would keep lawyers quite busy in litigation. A “formula retail store” is an entity with eleven or more outlets is covered, but litigation would immediately ensue over the definition of such a business.

As the law also applies to subcontractors and franchisees, this facet would lead to another whole “chapter” in litigation. In this regard, a franchisee who owns a Subway shop has the name of a big company but in reality is likely a very small employer. Thus, franchise owners could file equal protection suits, if they believe they are being singled out or unfairly treated compared to other similar entities. Another possible fallout is that the law could make current rules relating to tipped workers very confusing and costly, causing bigger restaurant chains to severely cut costs, e.g. lay off workers. That effect would have the equal and opposite effect of causing plaintiff side lawyers to ferret out violations, or what they think are violations.

End result. More litigation. Just what we need.