Tip Credit Op-Ed Newsletter

Since July of 2024, Chicago has been phasing out the tip credit which allows employers to pay their employees the minimum cash wage if they receive tips sufficient to cover the difference between the minimum wage. The State of Illinois currently has a minimum wage of $15 per hour, however, for tipped workers this can mean that employers only have to pay $9 per hour and the difference can be made up by tips. In 2023 the “One Fair Wage” Ordinance was passed and allowed for the gradual elimination of the tip credit. In 2024, this meant that the base tipped wage went from $9.48 to $11.02 per hour.

The elimination of the tip credit has shown itself to be a divisive topic. On one hand, many tipped workers do not make enough tips to justify a lower minimum wage, especially in cities like Chicago where the cost of living is significantly higher. For those individuals, this ordinance is a step in receiving a more livable wage. However, many restaurant owners are already struggling to deal with high rent, inflation on goods, and general costs associated with running a business, and have called for a reversal of the elimination of the tip credit.

In cities, such as Washington, D.C., their mayor has already called for the freeze and reversal of  their elimination of the tip credit. Washington, D.C. reports that approximately 70% of its restaurants have cut their hours and/or laid off staff to reduce costs following the city’s attempts to eliminate the tip credit.

Currently in Chicago, Alder Bennett Lawson has introduced an ordinance that would freeze the tip credit at 32%, which many restaurant owners see as a positive first step in their ultimate goal of reversing the tip credit phase out. As the future of the tip credit remains up in the air, the decisions which are yet to come may have a lasting effect on the restaurant industry.

For more information on Labor laws, please contact the qualified attorneys at Rock Fusco & Connelly, LLC.