Proposed California 'Tip Credit' Bill Fails to Pass

As San Francisco adjusts to a citywide minimum-wage increase that many restaurateurs say could have a chilling effect on business, a proposed bill that would have addressed one of their major concerns, lowering the minimum wage for tipped employees (otherwise known as a "tip credit") has been shot down by the California state assembly.

New minimum wages of $12.25/hour have already taken effect in Oakland (as of March) and in San Francisco (as of May 1), and include all tipped employees, meaning servers will continue to make tips on top of their increased paychecks. California is currently one of only seven states in the country that doesn't utilize a tip credit, even as lawmakers are considering raising the statewide minimum wage from $9 to $13, and San Francisco's minimum wage is poised to reach $15 by 2018.

The Sacramento Business Journal reported in April that the California Restaurant Association sponsored the bill (Assembly Bill 669), in an effort to "free labor dollars" to boost the paychecks of non-tipped workers in the back of the house, like cooks and dishwashers. The bill would freeze the minimum wage for servers earning tips equaling at least $15/hour at the current state hourly minimum of $9. In April, the bill failed to be heard by members of an Assembly labor committee, who cited insufficient support for the bill to move forward.

While the Restaurant Association has been calling for changes to California's tip credit law for years, the recent minimum-wage increases in San Francisco and Oakland have intensified the issue, as restaurants are forced to rethink business and hiring practices. However, the bill looks like it will be dead in the water until next year, even as cities like Los Angeles and Sacramento are expected to push for higher wages in coming months.