The tip credit rule went 1-for-2 at the ballot box Tuesday, falling in Washington, D.C., but surviving a tough challenge in Portland, Me.
Voters in the nation’s capital decided overwhelmingly to phase out the tip credit at restaurants, saying yes to a ballot initiative that will raise the hourly wages of tipped workers to at least $16.10 over the next five years.
But in restaurant-rich Portland, voters declined a similar initiative that would have raised the minimum wage to $18 over the next three years for tipped and nontipped workers alike. The result was somewhat surprising because Maine in 2016 voted to kill the tip credit statewide, only to have it reinstated after a lobbying effort led by servers.
The tip credit rule allows restaurants to pay tipped workers less than the mandated minimum wage as long as they earn the remainder from tips. It’s supported by restaurants because it keeps their costs down, but has come under attack from labor groups such as One Fair Wage, which says the subminimum wage hurts workers.
In D.C., nontipped workers currently make $16.10 an hour while tipped workers make $5.35. Under the new rule, they’ll make $6/hour starting Jan. 1 and get a $2 raise each year, amounting to hourly pay of $14 in 2026, plus tips. In 2027, their hourly wages will jump to whatever nontipped workers are making at that time.
More than 74% of D.C. voters approved the increase under Ballot Initiative 82.
“Voters in D.C. have been misled into supporting a pay cut for the tipped restaurant workers, and many restaurant owners will have to make drastic changes that will not work as proponents promised,” said Sean Kennedy, EVP for public policy at the National Restaurant Association, in a statement Wednesday. “We’re pleased voters in Portland didn’t make the same choice.”
He warned that restaurants would have to cut staff or hours, raise menu prices or add surcharges in order to offset the higher wages.
“This is a huge victory for tipped workers that will lead to higher pay, less wage theft, more equitable workplaces, and a more sustainable hospitality industry,” said D.C. Councilmember Janeese Lewis George, a supporter of the initiative, in a tweet.
In Portland, 61% of residents voted “no” to Question D, which would have raised the city’s minimum wage to $18 by 2023 for a wide range of workers, including tipped restaurant staff, ride-hailing drivers and third-party delivery drivers. It was backed by high-profile progressives including Vermont Sen. Bernie Sanders, who called it "the most progressive and inclusive wage initiative in U.S. history."
The tip credit is already banned in seven states: Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington.
The votes Tuesday were part of a new strategy of pursuing wage reform via ballot initiatives rather than legislation.
In another election result impacting restaurant wages, Nebraska voters approved Initiative 433, which will increase the state’s minimum wage from $9 to $15 by 2026. Subsequent increases will be tied to the cost of living. The initiative passed by a margin of 58% to 42%.
Nebraska was the only state with a $15/hour initiative on the ballot this year and becomes the 12th state to pursue a $15 minimum wage.
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