Although Maine’s legislative session has been fraught, leading to blocked bills and government shutdown over the 4th of July weekend, at least there’s one thing everyone could agree on: the tip credit should stay. A controversial portion of Maine’s minimum wage law which would do away with the use of tips being counted as wages has been removed, bringing relief to many service workers as well as their employers.
In November of 2016, Maine was one of four states which passed ballot initiatives to increase the state minimum wage. In addition to raising the minimum wage for most workers from $7.50 per hour to $9.00 per hour, Maine’s referendum also included a provision which would gradually raise the minimum wage for tipped workers until it reached the same rate as the general minimum wage. In the process, the “tip credit” (the amount of tips which an employer may treat as part of the wages of a service employee) would gradually decrease.
Restaurant owners balked at the elimination of the tip credit, as did many servers and bartenders who argued that the amount they made from tips was already high above the minimum wage, but likely to decrease in response to food costs or customer awareness of their increased wages. Many were also concerned that their employers would cut hours to save costs, resulting in less take-home pay. Although some, such as the low-wage restaurant workers represented by Restaurant Opportunities Centers United, argue that high-tipped workers are not representative of service employees across the state and particularly in rural areas, the cries of workers saying that they weren’t helped by the law was hard for legislators to ignore.
On June 23, 2017, Governor LePage signed Senate Bill 235 into law. The bill amends the minimum wage law by eliminating the increase to the minimum wage for tipped service employees and freezing the allowed tip credit at 50% of the general minimum wage. Under this formulation, the tipped minimum wage will still increase, but only in response to the general minimum wage, which is scheduled to increase by $1 per year until 2020. After 2020, the minimum wage will be adjusted according to increases in the CPI.
The bill provides additional protections for tipped workers by providing that an employer may not deduct any amount, including service fees, from employee tips which are charged to a credit card. It also specifies the information an employer must provide to an employee when electing to use the tip credit, which includes the amount of direct wages the employee will be paid, the amount of tips which can be credited as wages, and information on any tip pooling arrangement the employer opts to use.
Although the bill goes into effect ninety days after the adjournment of the legislative session, the tipped minimum wage will not change this year, as the law specifies that it will remain at its current rate of $5.00 per hour until December 31, 2017. In fact, it will not change next year, either: Maine’s general minimum wage is scheduled to increase to $10.00 per hour, so rather than increasing as it would have under the original law, the tipped minimum wage will remain at $5.00 per hour with an allowable maximum tip credit of $5.00 (50% of the general minimum wage) through 2018.