Across the United States, legal protections for employees in or around the restaurant industry continue to be debated, voted on, and put into practice: from California’s FAST Recovery Act passed in September — which could raise the statewide minimum wage to $22 an hour and be adopted by other states — to the current proposed subminimum wage abolishment on the ballot in Washington, D.C. and Portland, Maine.
First, here is a breakdown of all of the worker protection proposals — many of which would directly impact the restaurant industry — that voters will be deciding on on Election Day in two weeks:
- Washington, D.C. – Residents are voting on Initiative 82, which would essentially ban the subminimum tipped wage for all tipped workers performing service work, including restaurant servers. If passed, employers — who can currently pay their tipped employees as low as $5.35 — would have to more than triple their paychecks to $16.10 per hour.
- Portland, Maine – Come Nov. 8, voters will decide on whether to vote yes or no on Question D—which would raise the current minimum wage of $13 per hour to $18 per hour by 2025, and would also eliminate the subminimum tipped wage, which currently sits at $6.50. This legislation was proposed by the Maine Chapter of the Democratic Socialists of America.
- Illinois —Illinois voters will be voting on whether to pass the proposed Workers’ Rights Amendment, which would protect union rights by codifying in the state constitution the “fundamental right to organize and bargain collectively through representatives of their own choosing.” If passed, Illinois would be the fourth state to protect collective bargaining rights at a time when the clashes between Starbucks and its’ workers unions continue to make headlines.
- Nebraska – The Nebraska initiative 433 is on the ballot this November and would incrementally raise the minimum wage from $9 per hour to $15 per hour in 2026, and adjust it afterward based on cost of living.
- Nevada – The minimum wage amendment would increase the minimum wage to $12 an hour by July 2024 and remove inflationary adjustments from the current law.
If the subminimum tipped wage were to be outlawed in both Washington, D.C. and Portland, then the tip credit would be banned in nine locales, including seven states (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington).
We spoke with labor experts Christopher Nickels, an attorney at Quarles & Brady’s Labor & Employment practice; and Ken Jacobs, the chair of the UC Berkeley Center for Labor Research and Education, and both agreed that many of these ballot measures are being passed along political lines.
But what happens when a municipality passes one of these subminimum tip wage bans, which requires all employers to pay their tipped employees the full state (or federal, in some cases) minimum wage?
“It’s going to drive up labor costs, because currently the federal minimum wage for a tipped employee is $2.13,” Nickels said. “[…] That’s going to increase the cost of doing business for the restaurant owners, though I don’t know if you’ll be able to break the public’s habit of tipping. We could see even higher costs being passed onto the consumers because the restaurant owners have to bear the brunt of these increased labor costs.”
But according to Ken Jacobs, there is little evidence that getting rid of tip credits or increasing the minimum wage contributes to a decline in overall restaurant employment, though it could lead to faster restaurant lifespan turnover. He thinks that the trend of introducing measures to increase average hourly wages and improve worker protections will continue, though discussions of a $15 federal minimum wage likely won’t get to the federal level again, since Democrats don’t have a filibuster-proof majority.
“Especially given the current rate of inflation, I think we’ll see more of a push to raise the minimum wage and continue abolishing tip credits at the state level,” Jacobs said. “Since coming out of COVID, we’ve also seen pushes around paid sick leave and fair scheduling laws. Since the pandemic, there’s evidence that in places with paid sick leave, you see an overall reduction in flu transmission.”
Jacobs also thinks that California’s model for creating a regulatory council that would oversee worker protections in the restaurant industry will be adapted by other states, though in California, opponents of the legislation are trying to force it to a vote, which would go back on the ballot in two years, if successful.
One of the trickiest measures to analyze is the Biden administration-proposed reassessment of the economic reality test: or re-interpreting the definition of who is considered a full-time employee, part-time employee, or contractor under the Fair Labor Standards Act. As this proposal (not legislation) is being considered, all eyes and ears are on gig workers like Uber/Lyft drivers and food delivery workers, who are currently classified as contractors. If this proposal were to go through, it would return the test to the way it was before the Trump administration, when the rules were interpreted differently.
“The long-standing rule that was around for seven decades was a five-factor test,” Jacobs said. “What the Trump administration did is to say two of the five identified factors: the nature/ degree/control over the work, and the worker’s opportunity for profit and loss were designated as core factors and carried greater weight than the other factors. […] The proposal is to return to a totality of the considerations under the Fair Labor Standards Act.”
Jacobs said that many labor experts and lawyers believe that people who drive for Uber and Lyft are currently misclassified under the act, and that companies have been operating their labor policies in violation of federal law.
We reached out to third-party delivery companies, Uber, DoorDash, and Grubhub to ask about their stance on the proposed reassessment. Although Uber did not respond in time to press inquiry, both Grubhub and DoorDash are not concerned that the reinterpretation would affect their companies and encourage the federal government to consider drivers’ needs for flexibility as contractors to the company, rather than as employees.
“While this is just the first step in the process, we do not anticipate this rule causing changes to our business model or to Dashers’ status as independent contractors,” DoorDash said in a statement when the proposal was introduced earlier this month. “We will continue to engage with the Department of Labor, Congress, and other stakeholders to find solutions that ensure Dashers maintain their flexibility while gaining access to new benefits and protections.”
But not so fast: Jacobs said he predicts that if this measure were to be put into place, assessing where delivery drivers belong could go all the way up to the highest court in the land:
“Would they be reclassified immediately? No,” he said. “But it could be in the courts and litigation for years and will ultimately be up to the Supreme Court. […] Up until now, the tendency has been for these companies to settle [labor-related] lawsuits on a case-by-case basis.”
So if eventually, gig workers are reclassified as employees under the Fair Labor Standards Act, how could that affect restaurants? Nickels said it would drive up costs for the delivery platforms, who would then pass the expenses onto the restaurants or the consumer. It is also quite possible that drivers would want to directly work for individual restaurants as delivery drivers, since the flexibility of contract work would be diminished.
“All of this could result in reduced sales for restaurants as delivery platforms would have to drive up their fees,” Nickels said.
Much of this is of course, pure speculation based on the trends of introducing legislation that protects employees as the hospitality industry continues to evolve.
Contact Joanna at [email protected]
Find her on Twitter: @JoannaFantozzi
