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Who is Behind the Push to Eliminate the Subminimum Wage on Tipped Workers?

After failing to eliminate the subminimum wage during the last legislative session, the out-of-state advocacy group — One Fair Wage (OFW) — is once again spearheading efforts to get the bill passed.  

The proposed legislation aims to raise the hourly wage of tipped employees, such as waitstaff and bartenders to match the state’s current minimum wage — $15.598 an hour – advanced out of the Labor and Public Employees Committee on Tuesday (March 19). 

Connecticut’s minimum wage for tipped workers is presently $6.38 an hour for waitstaff and $8.23 an hour for bartenders. 

Currently, seven states have eliminated the subminimum wage including Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington. Additionally, both Washington, D.C. and Chicago have enacted this policy. 

At a public hearing on Feb. 27, Saru Jayaraman, the bill’s main proponent and president of One Fair Wage, drew attention to the difference in restaurant sector growth between California and Connecticut. Jayaraman, also a University of California, Berkeley professor, cited National Restaurant Association data showing California’s business growth at 12.9% over three years, outpacing Connecticut’s 4.5%. 

With the elimination of the subminimum wage, Jayaraman claimed that her organization found that the top 5 percent of tip workers in California have a medium wage of “almost $90,000 compared to only $82,000 a year for the highest tip earners in Connecticut.” 

However, concerns have been raised about the accuracy and credibility of Jayaraman and OFW in the past, casting doubt on their analysis. 

After finishing her public testimony, Rep. Steve Weir (R-Hebron) pointed out that when Jayaraman testified last year on the bill she was number 50 in line to speak but was “moved up the ladder because [she] had a flight to catch.” According to Weir, he read in the newspaper two days later that she was in fact in Connecticut “at a press conference at a local restaurant.” 

Feeling deceived Weir said he was “misled” and called “her credibility into question.” 

OFW is also facing allegations of providing deceptive information to Maryland lawmakers through falsified data. The organization told lawmakers that their research showed that more than 60 restaurants in the state pay their servers $15 an hour.   

However, when the public policy non-profit Employment Policies Institute (EPI) reached out to 21 of the listed restaurants, one was permanently closed, and 14 explicitly stated that they do not pay a base wage of $15 an hour. In fact, most of these establishments reported paying their workers a tipped $4 an hour.  

Of the five restaurants on the list that confirmed paying a base wage of $15, two have either eliminated tipping or introduced service charges. 

In Chicago and Washington D.C., the elimination of tip credits led restaurants to adopt service charges, to help offset the increase in labor costs. During an Oct. 12, 2023, hearing in Prince George’s County, Md., Jayaraman criticized these restaurants for what she described as stealing money from workers. 

Conveniently, she did not disclose her organizations role in using service charges as a strategy in a 2021 manual OFW co-authored. The manual — which has since been removed from their site — instructed restaurants on how they could implement one fair wage with service charges.   

However, OFW cautioned that service charges are not as beneficial to restaurants as tipping as they are taxed differently by the Internal Revenue Service (IRS) and ineligible for certain tax credits, might not be as advantageous as traditional tipping. 

The IRS taxes service charges since restaurant sales and such charges are not eligible for Federal Insurance Contributions Act (FICA) tax credits that restaurants can use to offset taxes on tips that employees receive. 

OFW criticisms of “greedy” restaurant owners is ironic as they are having their own problems keeping their side of the street clean. 

One former employee, Ryan O’Leary, called the organization a “sham and a fraud.” He claimed the organization advocated for placing the subminimum wage measure on the 2022 ballot in Washington, D.C., but failed to support local organizers during the campaign.  

“One Fair Wage did one thing: they secured a donation to fund the petition process,” O’Leary said. However, he did not disclose the specific amount of the donation or clarify whether the entirety of the funds was used for the petition drive.   

Furthermore, O’Leary raised concerns about potential Federal Election Commission (FEC) issues related to the organization’s 501(c)(4) status. 

Glassdoor.com — a site for jobseekers to look up ratings and reviews of companies — reveals that OFW received a mere 2.3 out of 5 stars and only 29% of reviewers would recommend them to a friend. 

A former field canvasser in Massachusetts alleges, “In my time there, the workers on the ground were regularly paid late with no explanation, given impossible goals with no real support or avenue to achieve them, and expected to be available for travel/events with extremely short noticeincluding to other states.” 

He went on to say, “I would never work for OFW again or advise anyone else to do so. The leadership engages with workers and uses them to legitimize their astroturf approach to organizing, for photo opportunities, as public speakers whose stories OFW then uses to sell their work, and to shield the organization from scrutiny.” 

Emphasizing that there are no pros “to working for this company,” a former lead organizer called the organization “a total fraud from top to bottom.” This source continued saying that “management has zero competence as ‘organizing’ staff and have only one qualification; defending the president of the org (Saru) from any criticism whatsoever. They will undermine the restaurant workers they are organizing if they show any signs of revealing the terrible and corrupt track record of Saru, with zero sense of shame.” 

Given the concerns about OFW’s credibility and questionable actions, it remains to be seen whether lawmakers will prioritize the voices of local employees and businesses over the influence of an out-of-state advocate. 

To better understand the potential impact of eliminating the tip credit for Connecticut’s full-service restaurants’ tipped employees, a survey released in February revealed that 93% of the participants are satisfied with the current tipping system, opposing any changes. Out of the 446 full-time tipped employees surveyed, 91% reported earning $20.00 or more per hour, with 60% earning over $30. This indicates a strong approval of the existing wage system among Connecticut’s tipped restaurant workers. 

Additionally, 96% said they prefer the current system that gives them a lower base wage and tips that provide the ability to earn more than the minimum wage. 

The proposed bill has garnered support through multiple written testimonies from big labor, the Working Families Party and Planned Parenthood. However, notably absent in the endorsements are ones from the very servers and bartenders the bill aims to assist. The legislation is now poised for a Senate vote, with the scheduling date still pending. 

This Week on Yankee’s Podcast Y CT Matters

The Independent System Operator-New England (ISO-NE) is warning that the batteries pushed by blue states in the region to prepare the grid for increased solar and wind generation may have significant trouble recharging in low temperatures. Nick Pope – a Connecticut native and Daily Caller contributor – shares further insights into the report.

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Meghan Portfolio

Meghan worked in the private sector for two decades in various roles in management, sales, and project management. She was an intern on a presidential campaign and field organizer in a governor’s race. Meghan, a Connecticut native, joined Yankee Institute in 2019 as the Development Manager. After two years with Yankee, she has moved into the policy space as Yankee’s Manager of Research and Analysis. When she isn’t keeping up with local and current news, she enjoys running–having completed seven marathons–and reading her way through Modern Library’s 100 Best Novels.

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