Gov. Jared Polis signed a bill Tuesday allowing local governments with higher minimum wages to expand their tip credits — and warned that if they don’t do so, the Legislature may have to act “more assertively” next year to control “out-of-whack tipped minimum wages.”
The signing statement attached to the Democratic governor’s enactment of House Bill 1208 demonstrated his frustration over a bill that was gutted in its second committee after workers and advocates trashed supporting eateries and threatened action against its sponsors. And it demonstrated yet another split between Polis and organized labor during a post-session sign-and-veto period that already has shone light on a growing chasm between them — a gulf that could grow wider before the end of the week.
HB 1208, sponsored by Democratic Reps. Steven Woodrow and Alex Valdez of Denver, came after the number of restaurants operating in the Mile High City dropped 22% last year as owners warned they could no longer deal effectively with increasing operational costs. Standout among those costs for many restaurateurs is a minimum wage that Denver leaders have raised to $18.81 per hour, $4 more than the state’s floor pay rate and up from $11.10 in 2019.
A 2016 state constitutional amendment requires that tipped workers get paid no less than $3.02 an hour less than local minimum wage, meaning servers and bartenders in Denver have seen their base pay rise 95% in the past six years even as customer traffic dwindles. A Colorado Restaurant Association survey found tipped workers make an average of $39 to $42 per hour with tips included, meaning that their wage hikes exacerbate pay differences with cooks and have forced eateries to lay off other staffers to cover those rising costs.
What the bill originally sought on the tip credit
HB 1208 would have reduced the minimum wage for all tipped workers to $3.02 below the state’s minimum wage, which is $14.41 per hour, regardless of whether a city or county has enacted a minimum wage that is higher than the state requires. While Denver has the state’s highest minimum wage, officials also have passed laws boosting the floor hourly wages in Edgewater, Boulder and unincorporated Boulder County.
After HB 1208 passed its first committee on an 11-2 margin, opponents began peppering supporting restaurants with one-star online reviews, placing threatening phone calls to the eateries and disparaging sponsors on flyers while witnesses threatened to oust them. Sponsors then changed the bill to allow local governments with higher minimum wages to reset tipped minimum wages to $3.02 below state levels — or keep them there if they boost minimum pay in the future — but no longer requiring rollbacks in Denver or other places.
In signing the bill on Tuesday, Polis emphasized that it was an important first step in helping struggling restaurants but insisted that more must be done. Specifically, the governor wrote, he expects the jurisdictions with the highest minimum wages to act on the bill and expand the tip credit now that the state is giving them the chance to do so.
“I will be closely watching progress”
The 2019 law Polis signed to allow local governments to require higher minimum wages than the state has essentially frozen the tip credit at $3.02 and thus has created “out-of-whack tipped-wage minimums” in the cities that have used its provisions, he wrote. That, in turn, has created distortions in pay that harm non-tipped workers like dishwashers and cooks by forcing restaurateurs to boost pay for already higher-earning workers at their expense, and it makes operations difficult especially for smaller eateries, he said.
Two kinds of local governments can take advantage of the provisions of the new law, Polis wrote. Those with higher minimum wages can go back and adjust tipped minimum wages, while those that have been considering raising minimum wages but have held off because of the tip-credit issue can now boost floor pay without raising tipped wages artificially.
“We heard through the process a desire to maintain local control so that localities can address this problem themselves. We’ve given them that opportunity and now they must act to preserve this important industry,” Polis wrote. “I will be closely watching progress in these two key jurisdictions, where restaurants are facing particular difficulties. However, if they do not act to solve the issues created by the underlying wage law, the legislature may very well need to step in again, this time more assertively, next year.”
Industry officials weigh in
Restaurant industry leaders and Downtown Denver Partnership President/CEO Kourtny Garrett thanked Polis for his signature in a news release. And the restaurant sector leaders took the moment, as the governor did, to emphasize that this new allowance for local action presents an opportunity that city and county governments must take.
Kristen Rauch, executive director for independent restaurant group EatDenver said the bill offers hope that business owners’ continued conversations with local officials will result in relief. Colorado Restaurant Association President/CEO Sonia Riggs said the bill can help to protect the tipping model that most restaurants use.
“This is a huge accomplishment for independent restaurants across Colorado,” Riggs said. “Now that local governments have the authority to increase their tip offset, we hope to empower Denver City Council and others to work closely with the restaurant community to address current economic challenges and help our industry thrive.”
Tip credit fight one more battle with labor
The veiled threat to take on the unions and worker-advocacy organizations that opposed HB 1208 as originally written comes 2-1/2 weeks after Polis vetoed the proposed Labor Peace Act overhaul that was the top priority for most unions this year. Senate Bill 5 would have eliminated a second election required to allow unions to seek to take negotiating fees from the paychecks of every employee after workers vote in a first election to organize — a proposal that business leaders fought ferociously.
Polis signed a separate union-backed measure this year to ramp up enforcement of wage-theft allegations, but he also vetoed a union-backed bill last week that would have required companies to keep drivers in autonomous commercial vehicles. And he has yet to sign or veto a union-backed effort to boost doctor choice significantly for injured workers — a bill he must decide on by Friday under intense lobbying from both sides.
In fact, the governor’s decision to sign HB 1208 at all is likely to anger some labor advocates. Its fiercest Democratic opponents, like Rep. Yara Zokaie of Fort Collins and Sen. Julie Gonzales of Denver, argued that it is unconstitutional, given that the 2016 amendment specifically sets a maximum tip credit of $3.02 an hour.
Polis ended his signing statement by thanking sponsors for their efforts on a “difficult bill.”