Nearly 30 people spoke out at the Tuesday Montgomery County Council meeting, voicing support for and against the elimination of the tip credit. While some said the elimination would create consistent, fair wages, other argued the elimination would decrease tipped employee’s overall salaries.
Employers pay tipped workers four dollars an hour in addition to tips. If an employee’s tips and standard wages do not total the minimum wage, their employer is required to make up the difference – the “tip credit”.
However some argue that employees having to ask their employers for this additional pay could be a deterrent. Therefore, a proposed bill would gradually eliminate the tip credit until July 2028, when tipped employees would be paid the normal minimum wage.
“Tips should be a bonus for extraordinary service, not a mechanism for employers to evade their responsibility to pay a fair wage,” Executive Director of Progressive Maryland Larry Stafford said at the hearing.
Some business owners argued that this change could increase menu prices, force businesses to add a service charge and could put some restaurants out of business.
Tommy Evans, the owner of Silly Yak Beer Company and Two Story Chimney Ciderworks, said that — due to his businesses’ proximity to other counties — if he had raised prices due to the tip credit elimination, customers would choose to go somewhere else.
“This ultimately would drive my customers away, it would drive employees away and it would really make the future my company much more in the air than where it is now,” Evans said.
Evans said his bartenders pay averages around $35 dollars per hour with the current tipping system.
That service charge, some tipped employees said, would discourage customers from tipping. The speakers argued that eliminating tipping could decrease their pay, which is often well above the minimum wage.
“The folks on the other side of this argument will tell you that we deserve one fair wage and that we do not make enough money as tipped employees to support our families. I for one can say that is not my truth and not and they did not speak for me or my colleagues,” server Elena James said.
James said the elimination of the tip credit would significantly decrease the earning potential of fellow servers and cripple their ability to make a living.
The speakers against the change also accused the organization behind this initiative, One Fair Wage, of using Montgomery County business names incorrectly in their materials.
Attendees who supported this change said eliminating the subminimum wage would eliminate the possibility of employees making less than the minimum wage by making that responsibility fall directly on the employer, not the customers.
State Delegate Gabriel Acevero said that during the COVID-19 pandemic, they weren’t making enough per hour to make ends meet.
“My hope is that we could really provide relief to workers with a one fair wage and moving away from this tip credit tip wages that is really steeped in racial injustice,” Acevero said. “We can do better we can send a clear message not just to the rest of the state what good policy looks like”.
Last week, Prince George’s County tabled a similar tip credit legislation after outcry from tipped employees. The conversations in the two counties come after Washington D.C. residents voted for a gradual end to the tipped minimum wage in 2022.
The Health and Human Services and Economic Development Committees have scheduled a joint session on this issue for Jan. 18.
