In 2019, 16 legislators introduced the “One Fair Wage” bills. Currently, Maine, Washington, and Flagstaff in Arizona, including the legislature in Michigan passed the ballot for One Fair Wage act. Some of the nation’s policy experts and top wage enforcement, including the U.S. Department of Labor, report that the current subminimum tipped wage system is complex. It is expected that employers are supposed to monitor tip levels and employee wage and make up the difference if tips fall short of the full minimum wage. The system is so complicated that it is difficult to enforce. This results in high levels of noncompliance by restaurant employers.
On subminimum tipped wage system, employers in Maine are required to make up the difference if a worker’s base wage base of $3.75 per hour plus tip does not add up to the full minimum wage. This system is both largely unenforceable and difficult to comply with for a number of reasons.
First, it requires extensive accounting and tracking tip flows, which is burdensome and difficult for employers. Second, employers are allowed to average tips over the course of the entire work-week and required to “top up” only if an employee’s average hourly earnings are less than the full minimum wage. Third, tips are allowed to be pooled among various types of restaurant employees, allowing a portion of the tips that a server receives to be reallocated to other employees. Fourth, tipped workers who are aware of wage theft or any forms of tip-stealing in their place of work are often hesitant to demand what they are owed out of fear of reprisal. Since most of these tipped workers rely on their supervisors to schedule them for shifts, and their earnings in tips often depend on which shifts they work, fear of retaliation, if they speak up against injustices, is common. Fifth, a 2014 report by the U.S. Department of Labor and the White House National Economic Council confirms these challenges, stating that “the rules for tipped workers are complicated and can be confusing for employers and employees alike.”
The report also noted that one of the most widespread violations in the tipped wage industries is the failure to keep track of employee tips that results in failure to ‘top-up’. More than 1 in 10 workers in predominantly tipped occupations report hourly wages below the full federal minimum wage, including tips, as per a recent survey revealed.
The New York Times in-depth story on the nail salon industry in New York found nail salon workers are experiencing similar issues like the restaurant industry. Under the state of law, nail salon workers are considered tipped workers. None of them received supplemental pay from their employers if their tips fall short of the minimum wage that day. Under the subminimum tipped wage system, it seems that customers are directly responsible for paying the worker’s wage. Before the implementation of One Fair Wage, many minimum wage servers in Maine usually received zero-dollar paychecks since their employer-provided wages go almost entirely towards taxes. Thus, the existence of a subminimum tipped wage renders tips a customer-funded wage replacement, rather than a gratuity for good service.