A legislative committee voted Wednesday to restore the “tip credit” used in the restaurant industry as part of a compromise aimed at addressing the most controversial aspect of last year’s minimum wage referendum.

Members of the Labor, Commerce, Research and Economic Development Committee endorsed a bill to restore the tip credit, which allows restaurants to pay workers below the minimum wage as long as tips cover the difference. To win support from Democrats leery of changing last year’s referendum, Republicans agreed to codify how restaurant owners calculate those wages.

If approved by the full Legislature, the changes will be a major victory for restaurant owners and workers who say phasing out the tip credit will have dire consequences for their livelihoods and an economically vital industry in Maine. The bipartisan, 11-2 committee vote came one month after tipped workers flocked to Augusta for a public hearing that lasted more than 12 hours.

“Of all the things going on in Augusta, the tip credit is one of the issues that I’ve heard the most about from constituents and restaurant owners in my district,” said Sen. Roger Katz, R-Augusta, the sponsor of L.D. 673. “As members of (the committee) have heard, those working in the restaurant industry overwhelmingly favor the tip credit system that has allowed many Mainers to earn a very decent wage working in restaurants and bars for tips.”

PANEL’S VOTE PLEASES WORKERS

Federal law allows restaurant owners to pay tipped workers 50 percent of the minimum wage as long as tips make up the difference. Restaurant owners, in turn, are obligated to cover the gap when tips fall short.

But November’s referendum increasing Maine’s minimum wage to $12 an hour by 2020 also began the process of phasing out the tip credit. By 2024, all restaurant workers would be making the full minimum wage.

Groups behind the ballot initiative – notably the Maine People’s Alliance and labor unions – argued that phasing out a tip credit policy abused by some restaurant owners would ensure workers are paid at least the minimum wage. But the change embroiled Maine’s restaurant industry in controversy.

Servers and bartenders worried that some diners would tip less generously – or stop tipping altogether – resulting in significant pay cuts for workers accustomed to earning $20 to $30 or more an hour. Restaurant owners, meanwhile, warned that the dramatic rise in hourly wages would force them to increase prices substantially or drive them out of business.

More than 4,000 workers joined a Facebook group, Restaurant Workers of Maine, that lobbied to restore the tip credit. And while restaurant workers from both sides of the issue testified during the public hearing April 5, those pushing to reinstate the tip credit substantially outnumbered people hoping to see the credit phased out.

Michael Hanson, a server at the Sea Dog restaurant in South Portland, said he was pleased with the committee’s 11-2 vote.

“It’s got bipartisan support, which is great,” Hanson said Wednesday afternoon. “Overall, restaurant workers and owners are happy with this outcome. It went better today than we expected.”

But organizers of the campaign to pass the minimum wage increase – including the phase-out of the tip credit – criticized lawmakers for voting to change the bill.

“Six months ago this week, Maine voters overwhelmingly approved the minimum wage increase referendum, which won with more votes than any citizen initiative in Maine history,” Amy Halsted, campaign manager for Mainers for Fair Wages, said in a written statement. “The Republican-led attempts to undermine every aspect of this law are deeply disappointing, as is the fact that some Democrats joined in voting to cut wages for tipped workers.”

Halsted also thanked the two lawmakers who opposed the amended bill in committee – Sen. Shenna Bellows, D-Manchester, and Rep. Michael Sylvester, Portland – “for standing up to the corporate lobby and standing strong to protect every part of Maine’s minimum wage law.”

EMPLOYEE PROTECTIONS ADDED

The compromise bill endorsed Wednesday includes several provisions that Democrats sought to strengthen the tip credit policy if it were to remain in place.

One of those provisions would prohibit restaurant owners from deducting credit card fees (paid by the business) from the tips received by servers. Federal law allows up to a 3 percent deduction. And while the Maine Department of Labor prohibits the practice by rule, the language in the bill would write that prohibition into law.

The amended bill also would require restaurant owners to reconcile a worker’s average pay every seven days to determine whether they made the minimum wage. Lastly, the bill would require employers to notify employees in advance of their direct wage as well as any “tip pooling” arrangement.

Rep. Ryan Fecteau, a Biddeford Democrat who co-chairs the Labor, Commerce, Research and Economic Development Committee, believes those additions will strengthen worker protections under the tip credit. And he believes those provisions, combined with the strong 11-2 committee vote, bode well for getting the two-thirds majority needed in the Democrat-controlled House.

“Our caucus wanted to ensure tipped workers have as many protections as possible,” Fecteau said.

HISTORIC HEARING HAD AN IMPACT

Rep. Stacey Guerin, a Glenburn Republican heavily involved in the issue, said the Legislature “heard the servers loud and clear.”

“It was one of the longest hearings in legislative history … and it was really an astounding showing of Maine workers saying, ‘Please give us back our tip credit,’ ” Guerin said. On Wednesday, Guerin also successfully added language to make the bill an “emergency measure” that would take effect immediately upon the governor’s signature – in time for the summer tourism season.

“Here comes the tourism season and we don’t want to have any doubts in customers’ minds about whether people are making the minimum wage and how much should they tip,” Guerin said. “The summer season is when a lot of restaurant servers can make extremely good money.”

Kevin Miller can be contacted at 791-6312 or at:

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