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Minnesota Legislature

Lawmakers consider capping minimum wage for tipped employees

Jennifer Schellenberg, president of Restaurant Workers of America and bartender at Northbound Smokehouse Brewpub in Minneapolis, testifies April 16 before the House Job Growth and Energy Affordability Policy and Finance Committee for a bill that would modify the minimum wage for employees receiving gratuities. Photo by Andrew VonBank

Some call it a tip credit, others call it a tip penalty. Regardless of what it’s called, it would create a new minimum wage category for certain tipped employees.

Sponsored by Rep. Joe McDonald (R-Delano), HF4061as amended, was held over Monday by the House Job Growth and Energy Affordability Policy and Finance Committee for possible inclusion in an omnibus bill. The companion, SF3108, awaits action by the Senate Jobs and Economic Growth Finance and Policy Committee. Sen. Scott Jensen (R-Chaska) is the sponsor.

The bill calls for certain tipped employees to be subject to a combined wage of $14 per hour for large employers, those with annual gross receipts of $500,000 or more, and $12 per hour for small employers. The wage would be comprised of a base rate of $9.65 or $7.87 per hour, depending on employer size, which will freeze for tipped employees, even as it increases over time for non-tipped employees. Instead, the combined wage would be indexed to increase for inflation using the same mechanism that increases the minimum wage under current law.

If a tipped employee at a large employer earns at least $14 per hour combined in tips and base wage then his or her base wage would be $9.65. If the combined amount earned is less than $14 per hour, his or her base wage would default to whatever the current state or federal minimum wage is, whichever is higher.

“When this is adopted, Minnesota will become the 44th state to recognize that tips play a very important role in the total earnings for many, many workers,” McDonald said. “We would be continuing a trend in America.”

Minnesota doesn’t have a uniform minimum wage. McDonald said this bill is not intended to preempt local and municipal minimum wage laws that have gone into effect or are pending implementation.

House Job Growth and Energy Affordability Policy and Finance Committee 4/16/18

Several members of Restaurant Workers of America testified in support of the proposal, saying it’s necessary in order to preserve the culture of tipping service workers.

WATCH Full video of the House jobs committee hearing on the bill 

Jeffrey Crandall, a bartender at Eagle Street Grill in St. Paul, said he has worked in the industry for over 20 years and his career has afforded him the flexibility and income to pursue an array of endeavors and maintain a good lifestyle. However, he’s concerned that if Minnesota doesn’t move to a two-tiered system, service workers like him could lose their jobs. 

“This increase without a two-tiered system will ultimately mean less jobs, less workers, workers replaced with iPads, family-owned local businesses disappearing, tips being replaced with service fees, which then become the property of the restaurant,” he said. “This means workers like me, who have always relied on tips to make a good living, won’t be able to make much more than minimum wage.”

Rep. Dave Baker (R-Willmar), who owns a restaurant, said minimum wage increases are a detriment to the industry and that without this change he warned full-service restaurants will become a thing of the past.

“The Restaurant Workers of America are doing us a great favor by talking about this because if it continues as the way it is going now, our full-service restaurants won’t exist in 10 years.”

There was also plenty of opposition to the bill.

Eli Edleson-Stein, a restaurant worker in Minneapolis, said Minnesota currently has a fair wage for all workers and that it’s an example of how the rest of the country can build a thriving industry with higher wages for all workers.

“Freezing my wage at a subminimum wage debilitates my ability to keep up with the rising costs of living,” he said. “In states with a two-tiered system, tipped workers are far more likely to live in poverty, access public assistance at a cost to the state, experience sexual harassment in the workplace from customers and staff, and wage theft from their employers.”

Desiree King, who has worked for the same high-end hospitality company for more than three decades, echoed similar concerns

“I think that to say that we as a group of people, because we earn tips, are not valuable enough to make the minimum wage is insulting and we are worth more than that,” she said.

The minimum wage has proven essential in her experience, noting that she had never received a non-mandated wage increase in her career.

“I don’t think that anyone can say they’ve never received an increase from their employer when they’ve worked for someone for 33 years,” she said. 

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