Initiatives to kill the tip credit advance despite Ohio's 'goat rodeo of a campaign'

Government Watch: For restaurants, not all the election drama is centered on whether Biden stays in the race, and not all the mud is being slung by the presidential candidates.
Ballots will be a battleground for full-service restaurants this November. | Photo: Shutterstock

Government WatchWelcome to Government Watch, a weekly Restaurant Business column focused on regulation, legislation, labor mandates and other governmental issues of relevance to the restaurant industry. This week's edition looks at new developments in efforts to put pro-labor initiatives on the November ballot.

For restaurateurs, and full-service chains in particular, not all the pre-election drama is centered on whether President Biden will stay in the race. Groups aiming to kill the tip credit via state ballot initiatives are making that issue the key one for the business this cycle, though they’re finding those end runs can be as difficult as trying to discontinue the break for restaurant employers via legislation.  

The local affiliate of One Fair Wage, the union-backed leader of the crusade, was all but tarred and feathered in Ohio after it failed to get a tip credit referendum on the state’s November ballot. The rules there on ballot initiatives require that residents in at least 44 counties sign a petition to put a matter before voters. Raise the Wage Ohio didn’t meet that requirement.

But instead of conceding gracefully, the labor advocate turned on Ohio residents. It blamed the failure to meet the county quota on the yahoo behavior of Ohioans living in the most rural of those jurisdictions. In a message sent to local media, it alleged that signature gatherers in the hinterlands were “verbally abused and harassed” because they were often low-income workers of color. In other words, people living outside the big cities of Cleveland, Columbus, Akron or Dayton were racist elitists.

Raise the Wage also alleged that it couldn’t submit its “hundreds of thousands of signatures” calling for a referendum because the office where the petition needed to be submitted had closed early to take in pre-July 4 fireworks displays.

State officials refused to let the accusations stand unchallenged. “This is a duplicitous, disorganized goat rodeo of a campaign that has made every excuse in the book for their lack of compliance with the law,” Ohio Secretary of State Frank LaRose said in statement, referring to Raise the Wage’s effort. “Access issues were never a problem. Rural Ohioans are not to blame. I won’t sit quietly while any group distorts the truth to cover for their own negligence.”

Raise the Wage has vowed to refocus its campaign on getting an anti-tip-credit initiative on a 2025 ballot. Off-year elections tend to have a lower turnout than presidential contests, making the industry’s quest of eliciting sufficient “no” votes theoretically easier.

The omission of a referendum on the 2024 ballot is a huge break for the local restaurant industry. The initiative called for raising the state minimum wage to $15 an hour, with the phase-out of the tip credit added on. Ballot proposals to raise the minimum are difficult to oppose because voters view the question put to them as, “Do you want your neighbors to get a raise?” The tip credit is a secondary concern, in part because it’s difficult for industry outsiders to understand.

But the turn of events has left the local restaurant industry with a complication of its own. To eliminate the need for a ballot initiative, the Ohio Restaurant Association called in May for raising the state minimum wage to $15 an hour via legislation but retaining the tip credit, albeit at a more costly level. Now it’s on record in calling for nearly a 50% increase in the lowest legal wage, from the current $10.45 to $15 by 2028. The bill it supports would raise the minimum wage employers directly pay servers and bartenders to $7.50 an hour, from $5.25.

An $18 minimum and no tip credit in Arizona?

One Fair Wage ran into fewer problems in its Arizona initiative drive; a sufficient number of signatures were collected and presented before the state deadline. Now it’s a matter of whether the petition will be certified, greenlighting the inclusion of the referendum on the November ballot.

The measure would raise Arizona’s pay floor to $18 an hour, from the current $14.35, and phase out the tip credit. Success would give the state one of the highest minimum wages in the country.

The local restaurant industry is taking an unconventional route to thwart One Fair Wage. It’s supporting a competing referendum that would permit employers to pay tipped workers 25% less than the state’s minimum wage provided gratuities bring the workers’ incomes up to the minimum threshold.  

Massachusetts and Missouri referenda are set to move forward

One Fair Wage also met the petition requirements to put a referendum on the November ballot in Massachusetts. The measure there would phase out the tip credit by 2029.

The petition has yet to be certified as valid and approved by the state.

In Missouri, labor proponents gathered enough signatures to meet the requirement for putting a wage initiative before voters in November. The proposal would raise the minimum wage to $13.75 per hour in 2025, with the threshold rising by $1.25 each year until it hits $15 in 2026.

It also requires employers to provide an hour of paid leave time for every 30 hours an employee logs.  

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