July 14, 2015 by Southern Maine Workers Center

Universality: Tipped Workers and the New Minimum Wage

Portland’s Municipal Minimum Wage is Strengthened by the Inclusion of Tipped Workers

As many people have heard, Portland City Council is backing away from the minimum wage ordinance they passed on Monday, because it calls for a raise in the base wages of tipped workers. Our Work With Dignity Committee, which has advocated for increased minimum wage with meaningful inclusion of tipped workers since last August, released the following statement today:

On behalf of low-income workers in Portland, the Southern Maine Workers’ Center (SMWC) commends the Portland City Council for having heard the people’s loud, clear call for an increase in the city’s minimum wage. In particular, the Southern Maine Workers’ Center applauds the courage of Councilors Hinck, Marshall, Costa, Donoghue, Duson and Mayor Brennan for voting in favor of the new minimum wage at Monday’s Council meeting.

Over the past year the Southern Maine Workers’ Center has advocated for a universal, enforceable, living wage. The ordinance which passed on Monday in a 6-3 vote is an important step toward this goal. Throughout the months of discussion about the minimum wage proposal, SMWC has been insistent that tipped workers must be included; that both the base wage (what the employer automatically pays hourly) of tipped workers must increase, and that their take-home pay would meet, at minimum, the new municipal wage. This is what the CityCouncil’s ordinance outlines, and what must be maintained.

We feel that it is important both to clarify how wages for tipped workers are paid, because there seems to be confusion about this. It is important to understand that, as it stands, state law requires that tipped workers take home the same amount of pay as non-tipped workers. What is confusing is that when people talk about the tipped minimum wage, they are often describing an amount that isn’t explicitly named in the law. Three different things comprise tipped workers’ wages:

The first is the base pay, which is the hourly rate paid by the employer. The second is what the worker makes in tips. Third is what we’ll call top-off; this is the pay from the employer which makes up the difference between the regular minimum wage and a worker’s base pay plus tips. Workers should always get paid a base wage, and should get either tips, a top-off, or a little of each.

How much is the base wage? Instead of spelling out what the base wage is, the law describes it as a result of the tip credit. The tip credit is the amount the law allows an employer to subtract from the regular minimum wage. So if the the minimum wage is $10 and the tip credit is $3, the base wage would be $7.

For example, currently in Maine, if a server works for 40 hours in a week, their pay could look like the following:

  • $3.75/hr as a base wage from the employer, or $150 per week.
  • Let’s say it is an inexpensive restaurant, or a slow week, and the server makes $100 in tips.
  • The employer is legally required to make up the difference between what the server has earned ($250 base wage plus tips) and what they would earn under the regular minimum wage. At $7.50 per hour (the regular minimum wage) they would have earned $300 for those 40 hours of work. So
  • the employer has to top off the server’s pay with $50 to make up the difference, and ensure that the employee is not making less than minimum wage.

 Portland’s Ordinance

What the Portland ordinance does:

  • The ordinance adopts the tip credit from state law, which is $3.75. That means a base wage of $6.35 ($10.10 minus $3.75) for tipped workers.
  • The ordinance requires employers to top off employees’ pay to $10.10/hour if tips fail to bring the worker up to that amount (after pay per hour has been averaged over a week).

For tipped workers, both the base wage and the top-off wage need to increase. Nationally, tipped workers are more than twice as likely as non-tipped workers to fall under the federal poverty line, and nearly three times as likely to rely on food stamps. Raising the minimum wage and the base wage for tipped workers helps to protect workers in these industries by making them less susceptible to unreliable tips, wage theft, and economic insecurity.

Working people rely on tips in restaurants, car washes, hair and nail salons, as well as other industries. These workers are disproportionately women, transgender people, people of color, and immigrants, and while some tipped workers make well above minimum wage, the median hourly wage for restaurant servers nationally is just $8.92 per hour, well below Portland’s new minimum wage. Tipped workers, how make up as much as 40% of minimum wage workers in Portland,  must be included in these much needed reforms.

As per the current ordinance, Portland City Council correctly increased the base wage of tipped workers. This will help mitigate the effects of employers who illegally take advantage of the confusingly-worded law. Some workers report that their employers pay the base wage and nothing else, no matter what their tips are. Even the state law about tipped wages is confusing, and where there is confusion there is opportunity for abuse by uninformed or dishonest employers. The ordinance strengthens the economic security of tipped workers by maintaining the current language, which keeps the tip credit at $3.75 and increases the base wage to $6.35.

We encourage the Mayor and members of City Council to continue to demonstrate bold leadership on this issue by maintaining the ordinance as it stands, thereby upholding value of universality and ensuring that all workers are meaningfully included in the benefits of this forward thinking initiative.

If you are a tipped worker City Council needs to hear your voice! Please contact Drew to talk about how to get involved in the campaign: