Committee advances bill to bar employers from deducting card-processing fees from tipped workers' gratuities

The New Mexico House Labor, Veterans and Military Affairs Committee gave House Bill 22 a due pass by acclamation after sponsors said the bill would prohibit employers from using a portion of customers' credit-card tips to cover card-processing fees.

Supporters told the committee that some point-of-sale systems are configured to deduct processing fees from tipped amounts, and the bill would ensure tipped workers receive the full gratuities patrons indicate. Representative Joshua Hernandez, a sponsor, described the measure as "a fairly simple and straightforward bill" that would disallow employers from using employee tips to pay transaction fees.

The bill’s primary goal is to protect tip-dependent workers. "This bill is about fairness. Credit card fees are a cost of doing business, and employers should not be passing that cost onto their employees," Representative Dela Cruz said. "Workers in the service industry rely on their tips. It's not extra money, it's their wages."

Kristen Thompson, representing the New Mexico Restaurant Association, told the committee the association is neutral on the bill. Thompson said the association supports the bill’s intent but believes the practice may already be addressed under state law, citing the state's minimum wage rules. Thompson also presented figures from the fiscal information report, saying New Mexico restaurants process an estimated $3,200,000,000 in annual sales and that credit-card processing fees on tips—typically 2% to 3.5%—could total as much as $112,000,000 per year at the high end.

Committee members and sponsors discussed technical and enforcement issues. Sponsors said many modern point-of-sale systems include a back-end setting—described to the committee as a checkbox—that, when enabled, splits a tip to cover processing fees. They said that, if the bill becomes law, vendors could remove or disable that setting through software updates so new systems would not allow the deduction. The committee chair asked how employees would verify whether deductions were being taken; sponsors replied that verification depends on access to end-of-day receipts and the POS back end, and that rollout timing would vary by vendor.

Representative Hall and other committee members expressed support on principle, saying they were unaware the practice occurred and describing the bill as a straightforward fix. Representative Terrazas moved the bill; Representative Anaya seconded. With no recorded opposition at the hearing, the committee granted HB 22 a due pass by acclamation. The committee did not record a roll-call vote during the hearing.

The bill’s sponsors said the measure is not intended to penalize small businesses and that compliance should be technologically straightforward for many POS systems. Committee members and witnesses noted the potential for a brief transition period as software vendors and individual establishments update settings and processes.