We in the District of Columbia like to pride ourselves on how progressive our community is. But it’s behind the curve now on an issue that directly affects nearly 29,000 local workers — those whom employers can pay far less than the minimum wage.
The draft Democratic Party platform supports an end to the sub-minimum, i.e., tip credit, wage. That would extend nationwide a policy already in force in seven states. The DC Council instead chose to merely increase the wage to $5.00 by 2020 — even less than the Mayor had proposed.
All our elected officials knowingly preempted our chance as constituents to decide whether all workers our labor laws can cover* should get paid at least $15 an hour — one fair wage, as it’s commonly called.
Let’s just say they know not only which side their bread is buttered on, but who butters it — restaurant owners represented by the local affiliate of the National Restaurant Association and other business owners for whom the Chamber of Commerce purports to speak.
I’ve written about the tip credit wage before, but for those new to the issue, here’s what it is and a summary of what’s wrong with it.
How the Tip Credit Wage Works
Employers in most states and the District may pay workers who regularly receive tips a much lower cash wage than the regular minimum. They must fill in any gap between the tip credit wage, plus tips a worker receives and the regular minimum.
So, for example, owners of sit-down restaurants in the District, along with hotel owners and other businesses like hair and nail salons must now pay their tipped employees $2.77 an hour, no matter what.
If their workers receive at least $8.73 an hour in tips, they’re home free. If not, they must add to paychecks enough to equal $11.50 an hour.
At best then, customers subsidize employers’ labor costs, though most believe they’re just rewarding workers who’ve served them.
Why the Tip Credit Wage Doesn’t Work
A common complaint — amply documented — is that most workers subject to the tip credit wage earn very little. That, in theory, is a problem with the minimum wage itself. In practice, however, workers may not get as much as they’ve earned — or even know they’ve been shorted. Several reasons for this.
First off, workers may not know how much they’ve received in tips. Consider, for example, a wait server who’s rushing from one table to another. How’s she supposed to keep track of tips, when so many now are added to credit card bills?
Second, employers may legally do several things to deny workers the full amount they receive in tips. They may deduct processing charges for tips added to credit card bills. They may put all tips into a pool and divvy them up among tipped staff, based on some formula they’ve established.
Third, the tip credit system virtually invites abuse. For example, we know of cases where employers have siphoned off tips from the pool to ramp up pay for non-tipped workers. In other cases, employers have required tipped employees to do a lot of work they don’t receive tips for while still basing their whole pay on the sub-minimum.
In still others, employers simply don’t fill in the gap between the sub-minimum wage, plus tips and the regular minimum. More than one in ten workers in tipped occupations reported total hourly wages below the federal minimum, according to White House economists and the U.S. Department of Labor.
The Labor Department has said it knows of at least 1,500 recent cases of wage theft associated with the tip credit wage. But there are surely more.
The provision that requires employers to ensure that tipped workers earn at least the full minimum wage is difficult to enforce, the White House report says. And the Labor Department has nothing like the resources to investigate as broadly as seems warranted.
This seems also the case in the District, where a coalition of local and national organizations recently called for, among other things, “proactive, increased enforcement” of worker protection laws. But the office responsible for enforcing them won’t have enough staff.
As things stand now, both the federal and local wage and hour enforcement agencies depend largely or solely on complaints filed by workers and organizations representing them.
But workers hesitate to complain because managers can readily retaliate — if not by firing them, then by reducing their hours or putting them on shifts that yield paltry tips.
Wage theft isn’t the only thing tip credit workers could, but often don’t complain about. A survey of restaurant workers found very high rates of sexual harassment — and twice as many in tip credit states as others.
More than half felt they had to put up with it because they’d lose tips — and perhaps their jobs — if they didn’t.
In short, what’s to like if you’re not a business owner who profits, legally or otherwise, by paying your workers the tip credit wage?
The owners and associations that represent them say tipped workers should and do like it and that eliminating it would harm not only them, but the local economy.
I’ll take up their arguments in a followup post — in part because we may not have heard the last of them, whatever happens nationally in November.
* Only Congress and federal agencies can set wages for federal employees and workers employed by federal contractors. The draft Democratic Party platform addresses both — the former with a $15 an hour minimum wage and the latter with an executive order “or some other vehicle.”