Aiming to reduce labor costs for restaurants, the Republican-led House on Monday night approved a measure that would create a lower minimum wage for tipped employees.
Sponsored by Rep. Pat Garofalo, R-Farmington, the bill passed 78 to 55, with seven DFLers supporting it.
The bill is an effort to revise the minimum-wage law passed last year by a DFL-controlled Legislature. It faces stiff opposition from Gov. Mark Dayton, DFL leaders in both the House and Senate and labor union allies, making its passage by the DFL-led Senate unlikely.
Garofalo and other supporters of the legislation said it would relieve pressure on restaurants who say labor costs are growing after the Legislature raised the state’s wage floor last year.
“This is really going to benefit small businesses,” said freshman Rep. Abigail Whelan, R-Anoka, who spoke in support of Garofalo’s bill.
Opponents issued a statement after the vote, which came shortly before midnight. “Tips should be a reward for good service, not an excuse to pay workers less,” said leaders of the Raise the Wage Coalition. “We strongly urge state senators and Gov. Dayton to protect the minimum wage law they enacted last year.”
The so-called two-tiered minimum wage measure sparked heated debate Monday night. DFL legislators offered several amendments to the bill that would have provided workers with earned sick leave and expanded workplace protections. The amendments were defeated.
Restaurant operators said labor costs have grown since August — when Minnesota’s minimum wage rose to $8 an hour, the first of three phased-in increases. They say that coming wage increases continue to eat into thin profit margins.
The state’s wage floor will rise to $9 an hour this August, and will rise an additional 50 cents an hour by 2016. Beginning in 2018, the minimum wage will be indexed to inflation.
Under Garofalo’s bill, crafted by the Minnesota Restaurant Association, tipped employees’ pay would be capped at $8 an hour. The proposed pay change would apply only if those workers earned a total of at least $12 an hour in a two-week pay period, after factoring in tips. If they failed to meet that threshold, they would earn the prevailing state minimum wage.
“We think this is a very reasonable way to protect the economics of table-service restaurants,” Dan McElroy, executive vice president of the Minnesota Restaurant Association, said recently in support of the measure.
The restaurant association has said that without the so-called two-tiered minimum wage, full-service restaurants might be forced to switch to a fast-casual or quick-serve format less dependent on food servers, to cut labor costs.
Restaurant operators also have said that automation, such as tablet computers, would replace employees. Others who testified recently in support of the proposal said it would allow them to boost pay for kitchen staff and other untipped workers.
While restaurant operators say the higher minimum wage could result in loss of jobs, evidence from the Minnesota Department of Employment and Economic Development undercuts that claim. The food and accommodations industry has added 1,100 jobs since August, when the minimum wage rose to $8 an hour, according to DEED employment data.
“No matter what supporters say, this bill would repeal, lower and freeze the minimum wage for tipped workers,” said Peggy Flanagan, co-chair of Raise the Wage Coalition, whose membership includes labor unions, nonprofits and faith-based organizations.
Flanagan, flanked by supporters outside the House Chamber, criticized the bill Monday afternoon ahead of the vote and said it would be harmful to women — particularly single mothers — since a majority of food servers are female.
Senate Majority Leader Tom Bakk, DFL-Cook, opposes Garofalo’s bill and has said it is unlikely to find much support in the DFL-led Senate. Gov. Mark Dayton said Monday he also opposes creating an exemption for tipped employees.
“I can’t imagine signing a tip credit bill,” Dayton said.