A showdown over the nation’s highest minimum wage is looming in Emeryville, where smaller restaurants say they need a break from rising costs and unions argue workers need the money.

In the end, city voters may decide.

Emeryville’s City Council passed an ordinance in 2015 that established a minimum wage increase every year as part a citywide effort to bring better wages for low-paid workers. On July 1, the city’s minimum wage became the highest in the country at $16.30 per hour. Previously it was $15.

Owners of small businesses say the spike could force them to cut staff or close, and the council passed an amendment in May pausing the new increase for workers in restaurants with up to 55 employees.

Unions and advocates greeted the amendment with outrage, saying it’s the first of its kind in the state and sets a dangerous precedent that disproportionately impacts lower-income workers. They collected enough signatures from city residents to send the issue back to the City Council.

“This is just going to send a message that we can pay them less money than they are worth just because maybe they make tips,” said Maria Moreno, a community organizer with Restaurants Opportunities United, an advocacy group for restaurant workers.

As early as Tuesday, the City Council could vote on whether to repeal the ordinance or put it on the ballot for voters to take up at a future election. In the meantime, restaurant owners throughout the city are unsure whether their payroll may change.

“Business owners are coming in incredibly freaked out. They don’t know what to do,” said Mayor Ally Medina, who voted against the amendment, which passed on a 3-2 vote. “It’s terrible. Workers don’t know how much they’re going to be paid. Businesses set their payroll a month in advance. It’s messy.”

Some restaurant workers say they oppose the amendment because they are worried they could lose their jobs if wages go up. Steve Shepherd, who works as a server at the Broken Rack pool hall, makes $15 an hour plus tips. He is one of dozens of restaurant workers who may not be eligible for the pay raise if the amendment is implemented.

“I love working here,” Shepherd said. “I think our shifts will get cut if it does go up to $16. Then I’ll have to look for a second job to pay my bills.”

Councilman John Bauters, who introduced the amendment, said his goal is to ensure that small business owners, who are also struggling with rising costs, are able to keep their doors open and maintain staffing. The amendment affects fewer than 50 restaurants in the city.

“I do understand the fact that there are people who work in this segment of the economy who really struggle to get by in the Bay Area,” Bauters said. “I didn’t want to see a loss of jobs, that was my concern.”

The East Bay city, with a population of about 12,000, is home to some of the Bay Area’s biggest companies, including Pixar Animation Studios, with more than 1,000 workers, and Peet’s Coffee & Tea, with more than 5,000. Also based in Emeryville are several major technology and software companies, including LeapFrog, an entertainment and electronics firm, and MobiTV, a provider of on-demand video.

Emeryville has a median household income of $88,661 and a poverty rate of nearly 12%, according to the U.S. census.

California is one of seven states — Oregon, Washington, Alaska, Nevada, Montana and Minnesota are the others — that don’t have a subminimum wage, pay that is less than the set minimum and is generally given to servers who make tips. Emeryville has established itself as a pioneer in raising wages for workers.

“Emeryville has been a leader in the minimum wage increase, no doubt about it,” said Liz Ortega-Toro, the executive secretary and treasurer of the Alameda Labor Council. “What has happened is that they decided they’ve done enough for low-wage workers in the city.”

The impact can be a blow to workers who don’t rely on tips, such as counter-service-only restaurants or employees who toil in the back of the kitchen, Moreno said.

Studies have shown that states with higher minimum wages are associated with decreased rates of smoking, drinking and obesity for low-income workers.

Restaurant owners say they’ve had to increase the prices of their menu items to be able to afford their labor costs. Some said a rising minimum wage could result in cuts, validating fears of workers such as Shepherd.

Douglas Smith, one of the owners of the diner Rudy’s Can’t Fail Cafe, a mainstay in the city since 2002, sent a letter to the City Council in support of the amendment pausing increases.

The diner employs about 40 people and has steadily increased the price of food it serves to offset the city’s rising minimum wage, Smith told the City Council.

“It’s about making the numbers work,” he said. “This location is open from 7 a.m. to 1 a.m., that’s a lot of hours to staff. My goal is to keep the staff working and keep the customers happy.”

Sarah Ravani is a San Francisco Chronicle staff writer. Email: sravani@sfchronicle.com Twitter: @SarRavani