Bill ending state’s tipped wage advances, but prospects uncertain amid pushback

Opponents say eliminating the tip credit will lead to decreased hours and layoffs for staff

An Illinois House committee advanced a measure that would end the state’s subminimum wage for tipped workers amid bipartisan opposition this week, but the bill’s sponsor said she’d seek further compromise before presenting it for a vote.

Current Illinois law allows employers to pay their tipped workers 60% of the state’s minimum wage. That amounts to $8.40 hourly, compared to the minimum wage of $14 per hour. If their wages plus tips do not equal minimum wage, the employer must make up the difference. However, advocates say, employers don’t always do that.

House Bill 5345, sponsored by Rep. Elizabeth “Lisa” Hernandez, a Cicero Democrat, would mandate that tipped workers are paid at least minimum wage, not including tips. She said the bill will eliminate “subminimum wage, not tips.”

Hernandez made her comments during a lengthy hearing Wednesday in a packed committee room filled with advocates on both sides of the issue. She ultimately promised to not bring the bill to a vote in the full House without first negotiating amendments on it, but she also noted one of those changes would better address inequity within the industry and add punitive measures against “bad actors.”

Proponents of the bill said not all employers follow the law and dependency on tips perpetuates inequalities. A 2014 report from the Economic Policy Institute think tank found at that time 66% of tipped workers were women and the poverty rate of tipped workers was almost double that of nontipped workers.

“Depending on tips to make a basic living wage is a system that exposes workers to poverty, to inequity and to harassment,” said Rep. Will Guzzardi, a Chicago Democrat, at the committee hearing Wednesday.

While the bill is intended to increase wages for tipped workers and address inequities within the industry, much of the roughly two-hour debate in the committee hearing focused on how the proposal will impact businesses and employees.

At a Capitol news conference earlier Wednesday, a coalition of tipped workers and representatives of the state’s restaurant and retail trade associations shared concerns about the proposal. They claimed the change would drive up prices at restaurants specifically.

Illinois Restaurant Association President Sam Toia said increasing the cost of labor will lead to owners reducing staff and increasing prices. Toia said many businesses still are recovering from the recession brought on by the COVID-19 pandemic.

“A business that used to be a business of nickels and dimes is now a business of pennies and nickels,” he said. “The proposal would only increase that stress on operators.”

Dominique Juarez, a server at Alexander’s Steakhouse in Peoria, said at the news conference she opposes the elimination of tip credit and that the bill “corners us into a no-win situation.”

She said that eliminating tip credit could lead to higher menu prices, which in turn would impact her relationship with regular customers, something she described as “the heart of what dining is all about.”

Currently, seven states — Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington, along with Washington D.C. — have laws in place to guarantee tipped workers make minimum wage.

Chicago enacted similar legislation in October, which phases out the city’s tip credit over five years, culminating with tipped employees receiving minimum wage in 2028.

“Chicago’s passed this,” Rob Karr, president of the Illinois Retail Merchants Association, said Wednesday. “We should wait and see how it plays out over the next five years before rushing into a similar proposal statewide.”

While the measure passed on a 17-11 vote, one of the committee’s 19 Democrats, Rep. Jawaharial Williams of Chicago, voted against it. Rep. Marty Moylan of Des Plaines, was recorded as not voting. Democrats, who control the General Assembly, subbed out seven members on the Labor and Commerce Committee before the vote.

Other Democrats spoke out against the measure at the Wednesday news conference.

That included Rep. Curtis Tarver of Chicago who said the idea that tipped employees don’t make minimum wage is false, and warned the proposal would have adverse effects.

“This is more legislation chasing a solution to a problem that does not exist,” he said. “Eliminating tip credit is going to hurt the very people that this legislation purports to help.”

Tarver also said while there may be some “bad actors” who aren’t paying their employees minimum wage, the current law should be enforced rather than eliminating the tip credit.

The One Fair Wage advocacy group, which has for years been pushing for an end to the tipped wage, celebrated the committee vote as a “historic step towards justice.”

“A direct legacy of slavery, the subminimum wage for decades has been used as a tool to force service industry workers, particularly women and people of color, to live in poverty,” said Saru Jayaraman, president of One Fair Wage, in a news release.

• Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.