NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5388
SPONSOR: Vanel TITLE OF BILL:
An act to amend the general business law, in relation to prohibiting
deceptive gratuity solicitations
PURPOSE OR GENERAL IDEA OF BILL:
Prohibits deceptive gratuity solicitations.
SUMMARY OF PROVISIONS:
349-h(1): Provides definitions,
349-h(2) Prohibits deceptive gratuities. States what they are. Provides
the attorney general with the power to proscribe other forms of decep-
tive tipping.
349-h(3): Provides the point-of-sale manufacturer's duties and liabil-
ity.
349-h(4): Provides the establishment's duties and liability.
JUSTIFICATION:
Today, New Yorkers are spending more for goods and services, on average,
than ever before. Studies by the Bureau of Labor Statistics show that
the average consumer in the United States spent $8,289 on groceries in
2021 and by 2023 that number increased to $9,985.
At the same time, wages remain relatively stagnant when compared to the
rising costs of goods and services for New Yorkers. New Yorkers need
more money and stronger buying power now more than ever.
Over the past few years, there has been a rising trend across the state
where customers are provided with more and more opportunities to tip for
goods and services as a result of new, inexpensive electronic systems
that are available to establishments. However, with a growing number of
new systems to solicit tips, there has consequently become a growing
number of tip solicitation practices that are highly deceptive.
Point-of-sale systems have turned the traditional tip jar, which
requires a customer to take an affirmative action to tip, to a screen,
which requires a customer to take an affirmative action to not tip. The
rise of electronic terminals has significantly disrupted this tradi-
tional tipping dynamic, leading to significant unintended consequences
for both consumers and tipped employees alike. These excess and decep-
tive tipping practices have led to what experts call "tip fatigue" and
"tipflation" which has resulted in unintended consequences for tipped
employees.
The average wage of New Yorkers has been trending upwards - though, more
slowly than rising costs - yet, for wait staff, their average salary has
dropped significantly, only compounding the issues that rising costs
bring.
The financial stability of tipped employees is closely tied to tipping
practices. According to the Bureau of Labor Statistics, the mean hourly
wage for waiters and waitresses in New York State decreased by 12.83%,
from $22.91 in 2022 to $19.97 in 2023. While tipping is certainly not
the sole factor influencing wage levels, it constitutes a significant
portion of service workers' earnings - 58.5% on average - and all wait
staff are entitled to at least the normal minimum wage if the difference
is not made up in tips. Major disruptions in tipping practices, exacer-
bated by deceptive tipping schemes, could have catastrophic consequences
for the financial well-being of wait staff and, consequently, the busi-
nesses that employ them.
Experts argue that deceptive tipping schemes exert undue pressure on
consumers, sometimes even tricking them, often employing manipulative
"dark pattern" design features that encourage higher tips or tipping
where the consumer otherwise would have not tipped. Most people who have
experienced these schemes would agree. Today, New Yorkers face the
following unfair and deceptive tipping practices:
*Sometimes on lower value orders the system will display a dollar amount
rather than a percentage suggested so that customers will tip a higher
percentage without realizing it (for example, tipping $1 on a'$3 order
sounds better than tipping 33% -- the equivalent percent);
*Oftentimes, the suggested a tip amount is based on a percentage that is
calculated inclusive of taxes - or in some cases, the percentage is
simply inaccurate;
*Some point-of-sale systems do not have a "no tip" option, forcing the
customer to manually enter $0.00 - in some cases, there is no option to
leave no tip or customize a tip;
*Sometimes the "no tip" or "custom tip" option is obscured and difficult
to see, which has the effect of pressuring a consumer to choose an
option that they otherwise would not have;
*Frequently, the suggested minimum tip amounts exceed standard tip rang-
es;
*The deceptive order of the suggestions can nudge or trick consumers
into providing a higher tip when they otherwise would not have, like by
placing the highest tip amount in the middle;
Perhaps as a mixture of tip fatigue and rising costs of living, between
2021 to 2023, the percentage of U.S. adults who "always" leave tips for
wait staff dropped from 75% to 65%, representing a decline of approxi-
mately 25. million U.S. adults. In non-traditional tipping contexts,
such as pick-up and takeout services, the percentage of adults who regu-
larly tip decreased from 17% in 2021 to 13%. This is despite the fact
that more and more consumers are exposed to deceptive tipping schemes.
Similarly, tipping rates for hair stylists, food delivery workers,
rideshare drivers, and housekeepers have all seen significant declines
over that same period. Experts believe that these statistics and others
indicating a decline in tipping suggest that the pervasive use of decep-
tive tipping schemes is driving consumers to become overwhelmed and
dissatisfied with the tipping process, making them more closely guard
their wallets when faced with the option to tip as a result reducing
overall tipping.
Consumer frustration with deceptive tipping is clear. According to
surveys, 32% of U.S. adults express annoyance at pre-entered tip
suggestions, and 18% admit to tipping less or not at all when confronted
with digital tipping prompts. In contrast, only 9% report tipping more
under these circumstances.
We must ensure that we strengthen New Yorkers buying power and protect
consumers, and we must also ensure that our tipped employees have a
meaningful livable wage. The reality is that when the tipping market-
place becomes saturated with deceptive practices, consumers become
disincentivized to tip, resulting in less tipping overall.
PRIOR LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
N/A
EFFECTIVE DATE:
This act shall take effect one year after it shall have become a law.
Effective immediately, the addition, amendment and/or repeal of any rule
or regulation necessary for the implementation of this act on its effec-
tive date are authorized to be made and completed on or before such
effective date.
STATE OF NEW YORK
________________________________________________________________________
5388
2025-2026 Regular Sessions
IN ASSEMBLY
February 13, 2025
___________
Introduced by M. of A. VANEL -- read once and referred to the Committee
on Consumer Affairs and Protection
AN ACT to amend the general business law, in relation to prohibiting
deceptive gratuity solicitations
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The general business law is amended by adding a new section
2 349-h to read as follows:
3 § 349-h. Deceptive gratuity solicitations. 1. Definitions. As used in
4 this section, the following terms shall have the following meanings:
5 (a) "Point-of-sale terminal" shall mean an electronic device through
6 which a consumer may initiate payment transactions.
7 (b) "Establishment" shall mean a place of business that is open to the
8 public in the state of New York.
9 (c) "Automatic gratuity" shall mean a gratuity that is charged to the
10 consumer's bill automatically and without further action from the
11 consumer, regardless of the consumers ability to reduce or increase such
12 gratuity.
13 2. Deceptive gratuities. It shall be unlawful to solicit a gratuity in
14 a deceptive manner. A gratuity is deemed to have been solicited in a
15 deceptive manner where:
16 (a) a suggested percentage or an automatic gratuity is provided and
17 such dollar amount that is communicated to the consumer that is repres-
18 ented by such percentage or automatic gratuity is inaccurate;
19 (b) a suggested percentage or an automatic gratuity is provided and
20 such percentage is calculated from the total amount owed including tax
21 or any other fees that the establishment may impose;
22 (c) other than situations where an automatic gratuity is provided, the
23 ability to add no gratuity is not presented as a prominent and easily
24 selectable individual option;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD08426-01-5
A. 5388 2
1 (d) a suggested percentage is provided and lacks the corresponding
2 dollar amount, or a suggested dollar amount is provided and lacks the
3 corresponding percentage, without such corresponding dollar amount or
4 percentage being conspicuously disclosed in close proximity to its
5 corresponding suggested percentage or dollar amount; or
6 (e) the solicitation is presented or functions in a manner proscribed
7 by rules and regulations promulgated by the attorney general.
8 3. Manufacturer's duties and liability. A manufacturer, software
9 provider, or any entity responsible for developing or providing software
10 for point-of-sale terminals:
11 (a) shall ensure that all terminals sold after the effective date of
12 this section do not include or have implemented any design or function,
13 or any ability for an establishment to add a design or function, within
14 a point-of-sale terminal that violates this section; and
15 (b) which has the ability to furnish software updates to existing
16 point-of-sale terminals shall update such terminals to exclude any
17 prohibited designs or functions that violate this section by the effec-
18 tive date of this section or, at such time when the attorney general
19 proscribes additional deceptive designs or functions, that such termi-
20 nals exclude any such prohibited designs or functions within a reason-
21 able period of time as prescribed by the attorney general.
22 4. Establishment's duties and liability. An establishment:
23 (a) shall not solicit a gratuity in a deceptive manner in violation of
24 subdivision two of this section;
25 (b) that has a non-compliant point-of-sale terminal in use shall bring
26 such terminal into compliance with this section by the effective date of
27 this section. Where such terminal cannot be brought into compliance with
28 this section because the point-of-sale terminal does not provide the
29 options to become compliant as provided by this section, the establish-
30 ment shall not be liable for failing to bring the point-of-sale terminal
31 into compliance. Where the manufacturer, software provider, or entity
32 responsible for the point-of-sale system updates the system to provide
33 the options to bring the point-of-sale terminal into compliance, the
34 establishment shall bring the terminal into compliance by the effective
35 date of this section. Where the updates to the point-of-sale terminal
36 are provided within sixty days of the effective date of this section,
37 the establishment shall have an additional sixty days to bring the
38 point-of-sale terminal into compliance. At such time when the attorney
39 general proscribes additional deceptive designs or functions, an estab-
40 lishment shall exclude any such prohibited designs or functions within
41 their terminal within a reasonable period of time as prescribed by the
42 attorney general; and
43 (c) that manufactures or designs its own point-of-sale terminal shall
44 have the same responsibilities and liability as a manufacturer as
45 provided by subdivision three of this section.
46 § 2. This act shall take effect one year after it shall have become a
47 law. Effective immediately, the addition, amendment and/or repeal of any
48 rule or regulation necessary for the implementation of this act on its
49 effective date are authorized to be made and completed on or before such
50 effective date.
