Lawmakers in Richmond are considering different proposals to raise the Commonwealth’s minimum wage. As a part of this conversation, lawmakers are discussing making changes to the tip credit which would have major consequences for the restaurant industry and its employees. The existing tip credit system works for tipped employees, customers, and restaurant owners.
What is the Tip Credit?
Most importantly, no tipped employee in a restaurant can ever legally earn less than the Virginia minimum wage. In Virginia, tipped employees must earn the minimum wage, and most earn significantly more. Virginia law allows restaurants to take what is called a “tip credit” where servers are paid a certain amount as a base wage and then earn money in tips. If the combination of the tipped employee’s base wage and tips does not meet or exceed Virginia’s minimum wage, then the restaurant must make up the difference to guarantee the server makes the minimum wage.
In reality, tipped employees typically make much more than the minimum wage, usually between $19-25 per hour with some earning significantly more. The tip credit system incentivizes tipped employees to deliver excellent service, enables customers to reward servers for great service, and allows restaurants to keep labor costs in check.
Why Does this Matter?
If the tip credit is eliminated or significantly altered, it will drastically raise costs for restaurants. In such a situation owners will be faced with difficult decisions. Some may reduce staff or staff hours or eliminate tipping all together in favor of a service charge. These moves will negatively impact tipped employees and reduce their take home pay.
Has this Been an Issue Elsewhere?
Over the past couple of years, labor activists have pushed attempts to eliminate the tip credit in several states and cities. In each of these jurisdictions (including Maryland, Washington D.C., Michigan, New Mexico, and Chicago), tipped employees have pushed back and urged lawmakers to preserve the tip credit because it is a system that works. In all of these jurisdictions, the tip credit has ultimately been preserved.
What Can You Do?
Take action below and let your lawmakers know that you care about this issue! Tell them that the tip credit system works for tipped employees, customers, and restaurant owners.