House approves revision to minimum wage law for workers who earn tips

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State lawmakers voted Tuesday to ask voters to amend the Arizona Constitution to let restaurants pay their tipped workers even less than they do now.

But supporters contend that it could leave those on the wait staff with more money in their pockets.

What SCR1040 really is about, however, is a bid by the Arizona Restaurant Association to blunt an initiative effort to raise the minimum wage even higher than required under proposals approved twice by Arizona voters.

restaurants, minimum wage, pay hike, inflation, restaurants
Steve Chucri, president of the Arizona Restaurant Association

At the heart of the fight is the current law, which has the minimum wage increase annually to match inflation. That is currently $14.35 an hour.

But that law allows restaurants to pay their tipped workers $3 an hour less, provided each worker’s take-home still hits the minimum wage.

A national organization operating under the umbrella of “One Fair Wage” is collecting signatures to ask voters to phase out that tip credit entirely by 2027. It also seeks to raise the overall minimum for everyone by an additional $2 an hour over the next two years, above and beyond the annual inflation adjustments.

That could easily bring the minimum wage to $18.

More to the point, those two provisions would mean restaurants have to pay that entire $18 – or whatever is the figure – regardless of how much a worker makes in tips, versus $11.35 under current law. And that alarmed Steve Chucri, president and CEO of the Arizona Restaurant Association.

So, what Chucri got the state House to adopt Tuesday is a proposal that would allow restaurants to pay their workers 25% less than the minimum wage.

Assuming that $18 minimum wage, that’s $13.50 an hour.

But there’s a sweetener designed to gather support from the public and at least some restaurant workers: It guarantees that any worker would take home at least $2 more than whatever is the minimum wage.

So, assuming that $18 minimum wage if the initiative passes, that means $20. But Chucri is convinced that most wait staff would earn that $20 minimum with their tips – saving money for his restaurants by leaving them responsible solely for just $13.50 of that.

Chucri’s organization has been at the forefront of fighting against Arizona even having its own minimum wage for nearly two decades.

It attempted to quash a 2006 initiative to set it at $6.75 an hour at a time when the federal minimum and the law applying to Arizona workers was at $5.15. But voters approved it by a 2-1 margin.

A decade later, with the state minimum wage at $8.05 after annual adjustments, proponents proposed hiking it to $12 by 2020 with future inflation indexing. It passed with 58% of the voters in support.

In the meantime, the federal minimum wage – the default absent a state-specific figure – has remained at $7.25 since 2009.

Chucri told Capitol Media Services that the decision to fight the initiative by getting lawmakers to put an industry-backed proposal on the ballot is not a concession that voters will again be willing to increase the minimum wage. In fact, he questioned whether the backers will be able to get the 255,949 valid signatures by the July 3 deadline.

But One Fair Wage appears to have at least some finances to get the required signatures. While campaign finance reports will not be due until this summer, the national organization is funded by Alliance for a Just Society that takes up liberal issues. It, in turn, is funded with various grants from foundations.

And similar efforts are taking place in other states.

If nothing else, Chucri said, it’s drawing a line in the sand. It would be one thing, he said, if the only issue was the minimum wage.

“And then there was predictive scheduling and paid time off and all these other things,” Chucri said. “It’s just never enough.”

What restaurant workers think depends on their own experiences – and their own fears.

During committee testimony, Jaime Sarli, who did not identify where she works, told lawmakers she makes “great money.” She also said that prior wage increases have led to higher menu prices and cuts in staff as restaurants seek to make up the cost.

But Tracy Gunderson who works at a restaurant at Sky Harbor airport, said some customers, perhaps because they are from foreign countries where that is not a practice, just don’t tip.

Rep. Justin Wilmeth, R-Phoenix, who is sponsoring the legislation, said he supports the idea of giving restaurants a financial break in not having to pay the full minimum wage themselves.

“We all know that the restaurant industry is a very small profit industry,” he said during Tuesday debate. “If you have a disparity in a forced raise of costs for a business, they will either shut down, limit staff or make other alternatives.”

Wilmeth said that was his own experience two decades ago when he decided to be a waiter.

“I wanted to make as much money as I could,” he told colleagues.

Rep. Analise Ortiz, D- Phoenix, said there’s nothing in SCR1040 to ensure workers get that guaranteed minimum wage plus $2 promised. Then there are places that require wait staff to share their tips with cooks, table bussers and others.

And she rejected the suggestion by Rep. David Cook, R-Globe, that those who are cheated will simply be able to report the problem to authorities.

“I guarantee there are restaurant workers in the restaurants that you might have eaten at – we might have eaten at them together, Mr. Cook – who would attest that they are being taken advantage of and it is not as simple as making a claim or picking up the phone and calling law enforcement when they are scared of their employer and they are scared of retaliation that can happen to them,” Ortiz said. She said all the measure would “ensure that the rich get richer and the working class people will be taken advantage of by the 1%.”

SCR1040 still requires a final House vote before going to the Senate which has not considered the language in the measure.

History of Arizona and federal minimum wage
Year / State / Federal
2006 / $5.15 / $5.15
2007 / $6.75 / $5.85
2008 / $6.90 / $6.55
2009 / $7.25 / $7.25
2010 / $7.25 / $7.25
2011 / $7.35 / $7.25
2012 / $7.65 / $7.25
2013 / $7.80 / $7.25
2014 / $7.90 / $7.25

2015 / $8.05 / $7.25
2016 / $8.05 / $7.25

2017 / $10.00 / $7.25

2018 / $10.50 / $7.25

2019 / $11.00 / $7.25

2020 / $12.00 / $7.25

2021 / $12.15 / $7.25

2022 / $12.80 / $7.25

2023 / $13.85 / $7.25

2024 / $14.35 / $7.25