TO: Members of the Assembly State and Local Government Committee

FROM: Hilary Chebra, Director, Government Affairs, CCSNJ

RE:  A-5433 (Reynolds-Jackson)

The Chamber of Commerce Southern New Jersey (CCSNJ) respectfully opposes A-5433 (Reynolds-Jackson), which proposes the gradual elimination of the tip credit for employers over a five-year period, culminating in its complete removal by 2030. While we acknowledge the intent to ensure fair compensation for tipped employees, we have serious concerns about the unintended and potentially harmful consequences this legislation could have on the business community, particularly in the hospitality sector.

The South Jersey region, particularly Atlantic City, relies heavily on the hospitality industry as a key driver of employment and economic activity. As such, any disruption to the operational framework of this sector, such as the elimination of the tip credit, would have an outsized impact on the region’s workforce, tourism economy, and long-term recovery efforts.

The hospitality industry, encompassing restaurants, bars, and similar establishments, operates on notably thin profit margins. The existing tip credit system allows these businesses to account for gratuities as a portion of employees' earnings. Importantly, employers are already legally required to provide make-up pay if an employee’s tips do not bring them up to the minimum wage, ensuring no worker takes home less than the law mandates. Eliminating this system would force businesses to absorb significant increases in direct labor costs, placing added strain on operations already grappling with inflation, supply chain challenges, and post-pandemic recovery.

To manage these added expenses, many employers may have no choice but to reduce employee hours, cut jobs, or raise prices, moves that would negatively affect both workers and consumers. In some cases, businesses may be forced to close altogether, weakening the local economy and reducing job opportunities.

Additionally, this proposal could impact New Jersey’s competitiveness. Neighboring states that preserve the tip credit structure may become more attractive to both existing businesses and new ventures, potentially leading to a loss of investment and economic activity in our state.

In conclusion, the CCSNJ believes this legislation presents a significant threat to the viability of South Jersey’s small businesses and the broader hospitality industry. For these reasons, we respectfully oppose A-5433.