Proposed changes to the way the law requires tipped workers to be paid have restaurant owners and workers paying attention to bills in Prince George’s and Montgomery counties.
Under Maryland law, tipped workers must earn minimum wage. Employers can pay tipped employees as little as $3.63 an hour if that amount, plus tips, is higher than the minimum wage. The amount of pay supplemented by tips to bring the employee’s pay up to minimum wage is called the “tip credit,” because employers can count that as part of the wage calculation. Some tipped workers can count on income of $60,000-$80,000 range or more. Critics of this practice contend that it is outdated and leads to pay inequity.
Tipped workers in Prince George’s and Montgomery counties recently voiced their concerns, often in a loud fashion, about bills in those counties that would have required all tipped employees to also receive minimum wage. There was even a physical confrontation outside the Montgomery county council building in Rockville, with one person shoved and another scratched, according to news reports.
Many restaurant owners, including those in adjacent Howard and Anne Arundel counties, said that in many cases, a law eliminating the tip credit would represent a pay cut and removed the incentive to provide good service.
Prince George’s County Council Bill 098 was tabled indefinitely. Bill 35-23 in Montgomery County may go up for a vote next year.
Council’s view
The legislation would have called for all tipped employees working in Prince George’s to be paid the going minimum wage in addition to any tips by 2028; it also called for the tip credit to gradually decrease during the next five years until the base wage for all tipped employees was the county’s higher minimum wage.
Also, employers would be required to submit quarterly wage reports.
The bill was introduced by Councilmember Edward Burroughs and co-sponsored by Sydney Harrison, Krystal Oriadha, Wala Blegay, Calvin Hawkins and Ingrid Watson.
From the council’s side, the bill was about more than just the server’s low base wages. “Our intention with this bill was to help our restaurant workers making less than $4 an hour who shouldn’t have to depend on tips to survive and support their families,” said Burroughs, the main sponsor. “Ultimately, we decided to put the bill on hold after hearing concerns from our county restaurant workers, some of whom I met with personally.
“In the months to come,” he said, “we are going to continue to study ways to protect workers and deal with issues like wage theft” by employers who are supposed to meet minimum wage standards.
The council introduced the bill to address the problem “of wage theft within the food service industry, said District 7 Council Member Krystal Oriadha. “Substantial reports show that there is an imbalance between employees in the industry and what they are being paid based on their tips.
“Despite some being able to maintain a livable wage solely on tips, there are groups who have been taken advantage of and get far less than they deserve,” said Oriadha. “In order to serve the needs of our community, we need to hold employers accountable by making sure employees are getting paid their true earnings.”
The goal of the bill was to ensure that these tipped employees “receive their due income with no hassle over wage theft,” she said. “The committee decided to hold the bill so that council members could have additional conversations with all stakeholders and ensure that the final bill addresses some key issues brought forward by employees on both sides during the committee meeting.”
Industry leaders relieved
The Prince George’s bill tabling brought relief to industry leaders in Central Maryland.
Marshall Weston, president and CEO of the Columbia-based Restaurant Association of Maryland, pointed out that a statewide tip credit repeal bill failed to pass earlier this year “because of strong restaurant industry opposition.”
Weston also predicted before the tabling that Prince George’s and Montgomery counties would reject eliminating the tip credit “after hearing from servers in these counties” and how it could dramatically impact their income, especially for those who hustle to make top dollar.
A similar observation was offered by Amanda Hof, executive director of Howard County Tourism, who monitored the proposed legislation in both counties. “Eliminating the tip credit is problematic,” she said. “Servers and bartenders are already guaranteed minimum wage and often make far more than minimum wage.
If the tip credit was eliminated, restaurants would have had to make up “the difference between the tip credit and minimum wage or more,” said Hof. They would have had “to raise menu prices and add service charges to checks. The result is higher consumer prices [and] increased overhead for restaurants that run on a razor-thin profit margin,” Hof said, as well as “less pay for many servers and bartenders.”
Steve Wecker has run restaurants in Howard and Anne Arundel counties for more than 20 years. The principal of Wecker Hospitality Group analyzed some of the math in the equation.
His company’s servers “are making very good money ― between $50,000 and $75,000, and sometimes more” he said, “and if I say to them, ‘You made $750 the other night waiting on seven tables, but how about if I pay you $20 an hour instead?,’ they won’t go for that.”
Talent pool
Wecker is concerned that if “we continue to go down this road with minimum wage and not creating a situation where people will come in and work hard so they can make more money” it “won’t be good for business.”
What the servers will do is “punch the clock, look at their phone while they’re working and wonder what they’ll do after work,” he said.
Wecker said if the bill ever passes in Howard County, “I’ll be required to pay servers $16.50, even if they aren’t learning as much as they work their way up. And I’d pay the dishwashers $16.50 ― which is what the line cook was making, but then wants more.
“And that would mean that I used to have nine employees,” said Wecker, but then would “only be able to employ six. It would be the same old, same old of the politicians, among others, feeling that everyone deserves to make a lot of money.”
Then come the workforce issues. “Restaurant owners don’t have a very deep talent pool in a state with two percent unemployment,” he said, “and now I can’t incentivize my workers with an opportunity to make $100,000?”
At street level
James King, CEO with Titan Hospitality Group, chimed in with more of the same. “Repealing the Tip Credit would have a catastrophic impact on the very employees (elected officials) claim to want to protect. This is a solution in search of a problem that doesn’t exist,” he said.
Wecker seconded that thought. “The politicians who sponsor these bills don’t often understand our business,” he said, “but maybe some of them can come run a couple of shifts and learn how this works before they decide where this money would come from.”
He also reiterated the need to provide servers incentives to excel. “When you don’t incentivize employees to work hard, they will perform at a level to just get by,” he said. “Not everyone deserves a trophy.”