OCEAN CITY – Industry leaders are following a bill that will impact tipped workers in the local hospitality sector.
In January, Maryland legislators introduced a bill that will, among other things, increase the minimum wage for tipped workers to $15 and eliminate the state’s tip credit model. While proponents believe the legislation will improve working conditions in the service sector, those in opposition argue it could lead to higher menu prices, layoffs and reduced working hours, among other things.
“Elimination of the tipped credit would have a devastating effect on our industry,” said Susan Jones, executive director of the Ocean City Hotel-Motel-Restaurant Association. “It would lead to terrible service, as there is no incentive to be nice or extra helpful, and there would be more fast-casual service restaurants pop up with laptop ordering and only a food-runner.”
Last year, Maryland Gov. Wes Moore signed into law the Fair Wage Act of 2023, increasing the minimum hourly wage to $15. However, the legislation excludes tipped employees, who currently hold an hourly minimum wage of $3.63.
To that end, at the start of this year’s session of the Maryland General Assembly, lawmakers introduced the One Fair Wage Act of 2024, a bill to increase the minimum hourly wage of tipped workers to $15. In addition to the wage increase, the legislation also proposes an elimination of Maryland’s tip credit provision, which applies an employee’s gratuities into the minimum wage requirement.
The bill has the backing of several lawmakers, as well as service workers, labor unions, justice organizations and small business owners. One Fair Wage, a national organization to end subminimum wages in the United States, reports the current minimum wage for tipped employees affects more than 100,000 Maryland workers, particularly women and people of color.
“With the pandemic, tens of thousands of these workers are refusing to work for subminimum wages, and hundreds of Maryland restaurants are raising wages to recruit staff, but many Maryland restaurateurs are finding that these workers will not return without policy guaranteeing a full minimum wage with tips on top,” a statement from the One Fair Wage website reads. “With industry-wide wage increases, there is national momentum for change.”
The organization noted that other states and Washington, D.C., have raised the minimum wage for tipped workers, creating an even greater staffing crisis for Maryland restaurants.
“Advancing policy to support these restaurant workers and owners by ending the subminimum wage for tipped workers would positively impact an overall restaurant industry of over 185,000 workers in Maryland,” the statement reads.
At the local level, however, industry leaders and business owners are sharing concerns over the One Fair Wage Act. For her part, Jones said it would have an adverse impact on Ocean City’s hospitality sector.
“At no point is a tipped employee making less than the $15/hr. minimum wage,” she said. “The law already states that the employer must make up the difference if tips from their shift do not bring the employee to the minimum wage threshold. Nationally, tipped positions generate much more than minimum wage, and locally, for some it is even higher than the national average.”
Amy Thompson, executive director of the Greater Ocean City Chamber of Commerce, agreed. She noted the hourly range of a tipped employee in the Ocean City area is between $17 and $50.
“The existing tip credit model in Ocean City has allowed single parents to earn a living wage and has enabled women and minority bartenders, servers, and other tipped workers to have incomes three times higher than our county average,” she said. “Enacting this bill would set these families back.”
Chad Olenchick, part owner and operator of Cabanas Beach Bar & Grille, said he and his business partners are in favor of saving the tip credit. He said the increase in the minimum wage for tipped workers would lead to higher menu pricing and added services charges.
“Tipping is at the discretion of the consumer, period,” he said. “Taking the humanistic approach, the restaurant industry is unique. It offers up many part time positions where single parent homes or struggling families can work minimal hours and make ends meet. I cannot speak for all restaurant/bar owners but if you don’t feel a sense of pride when your tipped employees do well you’ve lost connection.”
While he acknowledged the elimination of the tip credit could benefit some restaurant models, The Hobbit Restaurant owner Garvey Heiderman said it would hurt most businesses. He argued the legislation, if passed, would impact not only employees’ wages, but the customer experience.
“You have to make up for it somewhere, and that cost gets passed on to the customer,” he said. “Given inflation, people don’t want to see menu prices go up anymore.”
Heiderman said decisions on employee wages should rest with the businesses.
“It should be the restaurant’s decision,” he said. “Legislators shouldn’t be meddling in our business and making decisions for us. They already do enough of that.”
The concerns of local industry leaders and business owners have also been shared by the Restaurant Association of Maryland, which issued a letter to the General Assembly on the proposed elimination of the tip credit. The advocacy group argued a restaurant worker’s earnings would decrease without the tip credit.
“The Restaurant Association of Maryland strongly opposes legislation that would eliminate or reduce the tip credit because of the negative consequences it would have on tipped employee earnings, restaurant operators, and customers,” the letter reads. “State and local policymakers in Maryland have consistently preserved the tip credit. Over the years, the General Assembly has considered legislation that would have phased out the tip credit statewide, but it failed to pass because of strong opposition from tipped employees and restaurant operators. Servers and bartenders have repeatedly urged lawmakers to reject such proposals because they earn significantly more money under the current tipping system.”
In a statement last week, Sen. Mary Beth Carozza said she had heard from several business owners and restaurant employees in the Ocean City area prior to the start of this year’s General Assembly session. She said she was working with industry representatives in opposing the legislation.
“As a consistent and vocal opponent on repeated legislative efforts to change current tipped wages for employees, I constantly hear from local restaurant operators, servers, bartenders, and other restaurant employees on their strong and repeated opposition to this legislation,” she said. “At the end of December before the start of session, I made the rounds to several restaurants recognizing their milestone anniversaries – 60 years for Happy Jack Pancake House; 50 years for the Bonfire; and 40 years for Fish Tales. At these stops, both employees and employers brought up their continued and strong opposition to this legislation, and some are more than willing to come to Annapolis to testify in strong opposition as many local restaurant operators and employees have done in the past.
“I will continue to work with Susan Jones and her Ocean City Hotel/Motel/Restaurant Association on coordinating efforts to defeat this legislation again this session. I grew up in the restaurant business in Ocean City as a server, and my tips were essential to helping pay my college tuition, and I am hearing from many current employees who want to keep the current tip wages in place and want this legislation defeated.”
A General Assembly hearing on the proposed One Fair Wage Act of 2024 will be held Feb. 14.
