A fight is brewing in Michigan over restaurant tips

Mark Kurlyandchik | Detroit Free Press

A battle is brewing in Michigan over tipping in restaurants that could fundamentally reshape the industry. The outcome may be decided at the ballot box this November.

In May, the Michigan One Fair Wage coalition submitted more than 373,000 signatures in support of a ballot proposal that would, among other things, incrementally increase the state minimum wage to $12 by 2022 and eliminate the so-called tip credit that allows employers to pay their tipped employees as little as $3.52 an hour. The initiative would bring tipped employees' hourly pay in line with the state minimum wage by 2024.

The One Fair Wage initiative is backed by the Restaurant Opportunities Center (ROC) United and has received public support from actresses Lily Tomlin and Jane Fonda. The “Grace and Frankie” stars were in Detroit last fall to pitch the ballot measure at an event organized by the ROC.

During her remarks, Tomlin said that 70 percent of the state’s employees "who earn that measly $3.38 an hour are, drumroll ... wait for it ... brrrrrr ... women."

A provision of Fair Labor Standards Act currently requires employers to make up the difference if a tipped employee earns less than the minimum wage, which in Michigan currently stands at $9.25 an hour. But according to the One Fair Wage website, “enforcement is so lax and disorganized that wage theft has reached epidemic levels.”

There’s also evidence that tipping culture adversely impacts women and people of color in particular. A pair of Cornell University studies from 2008 and 2009 found that black front-of-house employees earned less in tips than their white counterparts regardless of the diners’ race and that slender, large-breasted blonde female servers in their 30s earned better tips than women who were perceived to be less attractive.

More: Restaurants consider ending tips in favor of higher wages

More: Michigan OKs $12 minimum wage proposal aimed at 2018 ballot

According to Ballotpedia, the Michigan One Fair Wage campaign has raised and spent more than $1 million, with most of the donations coming from the ROC and its affiliated organizations.

On the opposing side of the issue stands the Michigan Restaurant Association, a subsidiary of the National Restaurant Association, the industry’s largest trade association and lobbying group. A perennial adversary of the ROC, the NRA frequently opposes minimum wage increases and efforts to institute mandatory paid sick leave.

The MRA successfully fought off a similar ballot proposal in Michigan four years ago that aimed to increase the minimum wage and eliminate the tip credit.

According to the MRA, the current ballot proposal will increase restaurant owners’ labor costs by 241 percent and could mean the loss of 14,000 restaurant jobs in the state.

Some studies have found a correlation between an increase in the minimum wage with higher restaurant closure rates and lower employment rates.

And raising the wage is unnecessary, the MRA argument goes, because a poll of full-service member restaurants in Michigan found that servers make an average of $17 an hour. Another survey by the restaurant point-of-sale software company Upserve found that 97 percent of servers prefer to be paid via the tipping model.

“Simply put, this proposal is irresponsible and dangerous and it will fail in Michigan like it has failed everywhere else,” said Justin Winslow, President & CEO of the Michigan Restaurant Association, in a news release sent out the day the One Fair Wage signatures were submitted.

The MRA points to the botched effort at tip-credit elimination in Maine in 2016 as evidence that the tip credit should stay in place. A measure similar to One Fair Wage was passed by voter referendum there and then effectively overturned after tipped servers banded together to protest the move. The Maine legislature swiftly repealed the higher minimum wage for tipped servers and restored the tip credit.

That battle led to the rise of the Restaurant Workers of America, a group of restaurant employees dedicated to preserving or restoring the tip credit. The RWA recently established a Michigan branch to fight the One Fair Wage initiative and reportedly organized a rally at the Capitol Building in Lansing to draw the attention of legislators.

Both sides are digging in, but the signatures the One Fair Wage campaign submitted still need to be verified by the Michigan Board of Canvassers. At least 252,523 must be determined valid for the measure to move to the ballot box.

If it gets that far and is then approved by voters, Michigan would become only the eighth state in the country to operate without a tip credit.

Theoretically, Michigan's and other states' rules could be quashed by the federal government if the Democrats take control of the legislature next year and the White House in 2020. Senate Democrats introduced a bill last year that would raise the federal minimum wage to $15 and gradually eliminate the tip credit nationwide.

Contact Mark Kurlyandchik: 313-222-5026 or mkurlyandc@freepress.com. Follow him on Twitter @mkurlyandchik and Instagram: curlyhandshake.