New Mexico Increases Minimum Wage and Creates Uncertainty in Tip Pooling

On April 1, 2019, New Mexico Governor Lujan Grisham (D) signed Senate Bill (SB) 437, which amends the New Mexico Minimum Wage Act (MWA) by increasing the state minimum wage, increasing the minimum cash wage for tipped employees, and revising tip pool standards.

Currently, New Mexico’s minimum wage is $7.50 per hour for covered non-exempt employees. SB 437 requires the rate to increase as follows on January 1: $9.00 (2020); $10.50 (2021); $11.50 (2022); $12.00 (2023).

SB 437 also increases the minimum cash wage (MCW) that must be paid to employees who customarily and regularly receive more than $30.00 a month in tips. The MCW increases from the current rate of $2.13 per hour – the same rate under the federal Fair Labor Standards Act (FLSA) – to: $2.35 (2020); $2.55 (2021); $2.80 (2022); $3.00 (2023). For employers with operations covered by local minimum wage ordinances in Bernalillo County and the City of Santa Fe – where the MCW is $2.13 per hour – the state rate changes will require increasing the MCW for employees covered by both laws.

Effective January 1, 2020, SB 437 also changes tip pool standards. Currently, the MWA permits “the pooling of tips among employees,” which seemingly allows for a broad range of tip pool participants in a broad range of employment settings.  As amended, however, the MWA will be limited to “the pooling of tips among wait staff.” SB 437 does not define the term “wait staff,” which causes significant uncertainty in the application of the new law.  Open questions include:

  • In the restaurant industry, aside from servers (waiters/waitresses), which employees qualify as “wait staff”?
    • bar backs; baristas; bartenders; bussers; captains; counter staff; hosts; food runners; sommeliers?
  • Outside the restaurant industry, is tip pooling permitted at all?
  • Can employees create voluntary tip pools that include employees other than “wait staff”?

Perhaps the New Mexico Department of Workforce Solutions will exercise its authority to issue regulations to address these uncertainties.  That remains to be seen.  For now, employers with New Mexico operations have about eight months to prepare for the first round of changes. During this period, they should consider reviewing employee compensation to ensure covered employees are paid at least the state minimum wage on January 1, 2020, consulting with knowledgeable counsel about tip pooling policies and practices, and encouraging the Department of Workforce Solutions to issue rules – or at the very least FAQs – concerning valid and invalid tip pool participants. 

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.