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The Montgomery County Council will consider raising the minimum wage for tipped workers to match the regular minimum wage by 2028, setting up a debate that will pit business interests against advocates for low-wage workers in a wealthy county with deep inequities.
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The proposal from council members Will Jawando (D-At Large) and Kristin Mink (D-District 5) would eliminate the tipped wage credit — which allows employers to pay tipped staff less than the standard minimum wage as long as tips make up the difference — and raise the minimum-wage floor for tipped workers by $2 annually, starting next July.
“We understand that restaurant owners will need time to adapt,” the council members said in a letter introducing the bill.
Montgomery County was the first jurisdiction in Maryland to vote to raise the minimum wage to $15 in 2017, following the District, which did so a year earlier. But that legislation left in place a credit for employers of tipped workers, who can pay those employees as little as $4 an hour if they earn enough in tips to make their total hourly wage $15 or higher. The county is again following the example set in D.C., which voted last year to raise wages for tipped workers and implemented the first phase of that effort this year — leading restaurants across the city to implement service fees that have confused some diners.
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Although the issue is gaining traction across a wider swath of the DMV, eliminating the tipped wage credit has vocal opponents who say the move will kill businesses, especially restaurants, that were already hit hard by the economic turmoil of the pandemic and often operate on thin profit margins in the best of times. The Maryland General Assembly earlier this year considered a bill that would have done away with tip credits statewide, but that legislation did not pass, in part due to strong opposition from the food service industry.
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In the District, where the tipped wage increased to $8 an hour this summer, many restaurants have added a service charge to bills or raised menu prices to recoup some of the money. The new wage structure has also left some diners wondering whether and how much to tip. Some opponents say the confusion is harming business.
“Employees, economists, and restaurants oppose tip credit elimination because it harms everyone affected,” Rebekah Paxton, director of research at the Employment Policies Institute, said in a statement responding to the Montgomery County bill. “In neighboring Washington, D.C., diners and employees are frustrated by the aftermath: higher menu prices, more service charges, and lower tips for employees.”
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The Restaurant Association of Maryland also opposes the Montgomery County legislation. The group, which represents nearly 1,500 restaurants, caterers, food trucks and other food service businesses, argued that raising the tipped minimum wage will actually decrease tipped workers’ take-home pay because customers will be less inclined to tip generously if restaurants have to charge service fees to make up the revenue lost when the tip credit is eliminated.
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“Like all workers, restaurant tipped employees must earn at least the full applicable minimum wage per hour in base wages plus tips,” the association said in a position statement on the bill. “There is no subminimum wage for restaurant tipped employees.”
But many other groups support getting rid of what they call a “subminimum wage” for tipped workers. On Tuesday afternoon, the bill’s sponsors were joined at a rally supporting the bill by advocates from CASA, the Maryland Center for Economic Policy, the National Women’s Law Center, One Fair Wage, Our Revolution, SEIU 1199, Unite Here Local 25, and restaurant workers and employees.
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Those in favor of the change point out that seven other states, including Alaska, California and Washington, have passed measures that require some employers to pay tipped workers the same minimum wage non-tipped workers receive.
Jawando called the tipped wage credit a “legacy of slavery” that continues to perpetuate racial injustice and gender disparities in pay for a group of workers who are more likely to be women and people of color.
“After the Civil War, White business owners still eager to find ways to steal Black labor invented the idea of tipping” in the United States, Jawando said Tuesday.
In late July, the advocacy organization One Fair Wage hosted an event at Sala Thai restaurant in Bethesda where several county officials, including Jawando and Mink, waited tables for an hour to promote the proposal to raise wages for people who earn tips.
County Executive Marc Elrich, whose mother worked as a waitress in Silver Spring for many years, said he will sign the bill to raise the minimum wage for tipped workers if it passes.
“I used to sit up at night and watch her pour her change out on the table and count how much she had made,” he said while waiting tables at Sala Thai in July. “It was never very much.”
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