Chicago tipped wage ordinance aimed for highest in US before reaching compromise

The Illinois Restaurant Association recently announced in a press release a proposal to make Chicago's tipped wage the highest in the country before reaching a compromise with Mayor Brandon Johnson. 

The proposed ordinance originally aimed to protect servers and customers by ensuring that servers earn at least $20.54 per hour in wages and tips at restaurants with over $3 million in annual revenue. Additionally, the legislation cracked down on businesses not paying workers the legally required $15.80 minimum tipped wage by tripling the fines they receive for breaking the law, according to the same press release.

Currently, Chicago business owners who use a tip credit pay $9.48 per hour of a tipped worker's wage, with tips covering the remaining amount needed to reach $15.80. Under the original proposed ordinance, restaurants would continue this while adding the $20.54 per hour in wages for those higher-earning businesses.  

A compromise was recently reached between Chicago's Mayor Brandon Johnson and restaurant industry leaders to gradually increase the tipped minimum wage over five years instead of the initially proposed two years. According to Crain's Chicago Business, this compromise will have the tipped minimum wage meet the standard minimum wage by 2028, with an 8% increase in the base wage each year beginning July 1, 2024. 

The proposed ordinance also sought to safeguard Chicago’s small and family-owned businesses from a sudden increase in labor costs. Alderman Bennett Lawson (44th Ward) expressed concerns about eliminating tipped wages, stating that it would hurt neighborhoods and force some family-owned establishments to close, resulting in lost jobs. 

Sam Toia, President & CEO of the Illinois Restaurant Association, commented on Lawson’s concerns saying, “Currently, the city needs to make sure that bad actors who aren’t paying their employees at least $15.80 an hour are being penalized for breaking the law. Alderman Lawson’s ordinance does that while not driving labor costs sky high for smaller, family-owned restaurants that are the lifeblood of our neighborhoods.”

As reported by Crain’s Chicago Business, the amendments to the original ordinance include a privately funded $500,000 pool to offer grants to small neighborhood restaurants transitioning to the higher proposed wage. As long as unioned restaurants have collective bargaining agreements with their workers, the amendment will continue to allow them to pay a lower wage.

With support from the Illinois Restaurant Association and negotiations between the mayor's administration, the amended ordinance with the five-year phase-in is expected to have enough votes to be approved; however, the approval will not come without some pushback from businesses who may need more time to think it over, Alderman Carlos Ramirez-Rosa (35th) told Crain’s as the legislation’s co-sponsor. The final City Council vote could take place on Wednesday, October 4.