Chicago Restaurants Fight to Save the Tip Credit

The Illinois Restaurant Association and dozens of restaurant industry operators and servers united Tuesday morning for a press conference to oppose Raise Chicago, an ordinance being considered by the Chicago City Council that would eliminate the tip credit in restaurants. The event took place at Norman’s Bistro, adjacent to Chicago’s Hyde Park and Kenwood communities at 1001 E. 43rd Street.

Raise Chicago proposes raising the minimum wage to $15 an hour by 2021 and eliminating the tip credit by 2023. The IRA opposes this ordinance, as it would force a 144 percent labor cost increase on employers with tipped employees while driving up costs for restaurant-goers.

Attendees heard from the Illinois Restaurant Association’s President and CEO Sam Toia; Chef/Owner Norman Bolden of Norman’s Bistro; Virginia Mills, a server at the famed Lou Mitchell’s restaurant for 25+ years; and Elizabeth Cambalik, a bar manager at Old Crow Smokehouse, part of Third Coast Hospitality. All voiced their concerns, sharing their personal stories and elaborating on the disastrous effects this legislation would have on businesses and livelihoods. Dozens of restaurant industry representatives representing a spectrum of Chicago’s diverse restaurants and positions were in attendance in support of this position. (Footage from the press conference is available here.)

Providing an overview of the issue, Toia expresses that the elimination of the tip credit would create an unfathomable financial burden for Chicago’s 7,000-plus eating and drinking establishments.

“On average, 95 to 97 cents of every dollar taken in by a restaurant goes right back into the food, employees, maintenance and all the other costs that come with running the business,” he says. “We have very little room to absorb huge increases in labor costs and remain in business. This is why the tip credit is so crucial to restaurants and the hundreds of thousands of people we employ in Chicago.”

Toia also dispels ties of tipped wages to broader, systemic issues like wage theft and sexual harassment.

“Let me be clear – we are not here to support bad actors. No tipped employee can earn less than Chicago’s $13 minimum wage through the combination of their wages and tips,” he says. “And the IRA condemns all forms of harassment in the workplace. Period. We supported legislation requiring every employee and manager in all restaurants and bars to take sexual harassment prevention training starting in 2020.”

Representative restaurant owners and workers also share their perspectives.

Bolden believes that all servers should earn at least minimum wage, and makes the point that it is, in fact, already the law for employers to make up the difference in the rare instances that servers’ hourly wages and tips do not add up to meet minimum wage requirements. Massive penalties await those who skirt this law. “I mention the rarity of needing to make up this difference because Chicago’s tipped workers make well above minimum wage, $19-25 per hour,” he says.

Bolden also shares concern over the grave consequences of eliminating the tip credit – which could force him to add a service charge, raise menu prices and possibly reduce waitstaff hours and shifts given the restaurant industry’s slim, three to five percent profit margins. “This means that my servers are going to ultimately make less, and my customers are going to pay more.” The end result? Servers leaving their positions, less satisfied guests and lasting damage to the “sense of community and family that we’ve worked so hard to create.”

“Ninety-six percent of full-service restaurants are independently operated, just like Norman’s Bistro. This number is going to take a major hit if restaurants like mine are forced to adjust compensation models,” Bolden says. “I urge the City Council to vote no on the disastrous effects this ordinance will have on my restaurant, and those of so many of my respected colleagues.”

Virginia Mills has enjoyed a successful, 25-year career as a waitress at Lou Mitchell’s, which has motivated her to speak out against the proposed ordinance. She explains that in a service charge model, money added to the bill wouldn’t automatically go to servers like tips do. Restaurants aren’t legally bound to share service charges with staff and realistically, they would need to keep at least some of it for operating costs if the ordinance passes because they would be unable to afford to pay $15 per hour plus tips.

“Raise Chicago is not a solution,” she says. “It’s a disaster waiting to happen. The math simply doesn’t add up. I, for a fact, know that my boss won’t be able to give all of our servers an $8 raise to meet the minimum wage should the tip credit be eliminated. I’m compensated really well for my kindness, efficiency and care for our guests at Lou Mitchell’s. Please don’t take the opportunity to continue earning well away from me and my colleagues.”

Elizabeth Cambalik, who has served as a bartender and bar manager for Third Coast Hospitality for the better part of nine years, is also vocal about her opposition. She’s not alone: A recent survey by Google indicated that nearly sixty percent of restaurant workers opposed a minimum wage increase if it meant the elimination of tips. She paints the picture of industry predecessors who attempted to move to a no-tip model and failed – such as famed restaurateur Danny Meyer, who lost forty percent of his long-time front-of-house staff after moving to a “no tipping” model in 2017, or respected San Francisco restaurants Trou Normand and Bar Agrcole, whose tip-free experiment resulted in a 70% loss in wait staff. Owner Thad Vogler told CNN Money that his servers were making as much as $45 per hour with tips, a figure that fell as low as $20 in a no-tipping environment.

“Let’s learn from our predecessors who have experimented before us. Let’s not make Chicago’s thriving restaurant community part of these terrifying statistics,” says Cambalik. “Save the tip credit.”

News and information presented in this release has not been corroborated by FSR, Food News Media, or Journalistic, Inc.