The Federal Minimum Wage for Tipped Employees—Is a Raise in Store?

President Obama has made increasing the federal minimum wage a priority for the administration due in no small part to sustained union efforts over the past few years—including “worker center” protests and campaigns aimed at the hospitality industry, such as “Fight for 15” and “Fast Food Forward” To this end, President Obama issued Executive Order 13658 on February 12, 2014, announcing an increase in the minimum wage rate to $10.10 per hour for workers on federal service and construction contracts. The U.S. Department of Labor (DOL) published a final rule implementing that executive order on October 7, 2014.

As the Obama administration has been contemplating a strategy for enacting a federal minimum wage increase, 23 states and the District of Columbia enacted minimum wage increases in 2014. Of the 23 states that increased their minimum wage rates in 2014, however, only 7 increased the minimum wage for tipped employees. At least four other states are set to consider an increase in their minimum wage rates in 2015, including the rate for tipped employees.

These increases raise the question: What position will the Obama administration take on the minimum wage for tipped employees? It must be remembered that between 1999 and 2007, the federal minimum wage remained unchanged. President George W. Bush signed into law a series of increases in the federal minimum wage (the last of which took effect in 2009) to reach the current rate of $7.25 per hour. While many states raised their tipped-employee minimum wage rates during this period, the federal minimum wage for tipped employees has remained at $2.13 per hour since 1991.

At a 2014 hearing before the U.S. Senate Committee on Health, Education, Labor and Pensions, U.S. Secretary of Labor Thomas E. Perez decried the “unconscionable rate” of $2.13 per hour for tipped employees. Secretary Perez stated that whenever an increase in the minimum wage has been debated by Congress, the interests of tipped employees “get left on the cutting room floor.” A 2014 report by the White House and the DOL characterized the issue over the tipped minimum wage as a women’s issue, noting that 72 percent of tipped occupations are held by women. Not surprisingly, Secretary Perez has talked about wanting to increase the tipped minimum wage rate to 70 percent of the full federal minimum wage. Still others have argued in favor of totally eliminating the tipped minimum, claiming that it does not function well in practice as workers often fall short of recording every hour worked and are unwilling to hold employers accountable.

Whether due to the Obama administration’s organized labor-backed efforts, or election year political maneuvering on both sides of the aisle, one thing is certain: Legislative debate on raising the minimum wage will come up in Congress sooner rather than later, and with it will come debate about the efficacy of the tipped minimum wage. Will it, too, be raised? Will it remain the same as it has since 1991? Or will it be eliminated altogether? Stay tuned.