The Industry Backlash Against Low-Wage Worker Victories

Over the past year, media coverage of the red-hot labor market gave employers considerable print space to rehash stale narratives of how “no one wants to work anymore.” Less prominent were the sober facts: wage gains have barely kept pace with inflation, the cost of living crisis is dire, and race and gender wage gaps persist — especially among tipped workers.

Despite these challenges, some of the lowest-paid workers in the country — delivery drivers in New York City and restaurant workers in Washington, DC — have won significant victories. The New York drivers won the country’s first minimum wage for their occupation and DC servers won a ballot initiative to get rid of the local subminimum wage for tipped workers.

But industry lobby groups in both cities have used malicious tactics to drag out the implementation of these victories. In New York, they managed to impose a last-minute stay order before drivers’ first pay increase took effect. In Washington, the restaurant industry drove a bullish attempt to overturn the tipped wage ballot victory through legislation.

So far, dogged worker movements have managed to hang on to these wins. But employers aren’t giving up their steadfast commitment to keep the bar low. Now they’re unabashedly pushing for even further gains via tax exemptions and wage liability limitations.

The powerful opponents of low-wage worker wage increases 

The National Restaurant Association has long been the driving force behind a two-tier wage system that has kept employers’ responsibility for tipped worker wages frozen at $2.13 per hour at the federal level, subjecting workers to every kind of harassment to secure customer tips for the rest of their pay. Now gig companies, like Uber and Doordash, have enthusiastically adopted this two-tier wage system, even as they aggressively deny employee status for delivery drivers.

Up against the money, power, and influence of the National Restaurant Association and gig companies, worker-led movements have recently delivered enormous wins.

One Fair Wage, a national campaign fighting to end the subminimum wage in the service industry, won a resounding victory in DC through a November 2022 ballot initiative. Seventy-four percent of voters favored phasing out the subminimum wage for tipped workers, giving over 15,000 workers a raise from $5.35 to $16.10 per hour by 2027.

Delivery drivers, an adjacent profession that has moved from the purview of restaurants to apps but is still deeply connected with the restaurant ecosystem, also won big in New York City. Los Deliveristas Unidos, a worker collective representing over 60,000 delivery drivers, pushed for and won a six-bill package in September 2021 that included access to restaurant bathrooms, tip transparency, and minimum wage. This legislation also led to a study that was the basis for the introduction of a minimum wage for drivers.

The restaurant industry is fighting back against a DC ballot victory to phase out the tipped minimum wage

Instead of responding to the new DC wage law by adopting more equitable business models, the restaurant industry is pushing for more gains for employers.

At the time of the first pay increase for DC tipped workers (a princely 65 cents an hour), the Restaurant Association Metropolitan Washington encouraged their member restaurants to start charging a service charge of 20 percent, the customary tip amount, to cover servers’ base wages. The lobby group also supported a bill, the Workers and Restaurants Are Priorities (WRAP) Act, that would exempt such service charges from taxes, a move that would substantially lower the city’s sales tax revenue.

The cobbling together of wages from multiple sources (employers, customer tips, and service charges) is the antithesis of one fair wage. It disadvantages the worker and confuses customers. The Office of the Attorney General has had to issue multiple clarifying advisories on restaurant fees to help consumers navigate through all this complexity.

The restaurant lobby group has tried to claim that this legislation is “pro-worker” since it would fast-track the wage raises for tipped employees. But unlike the sensible multi-year schedule that DC residents voted for, this accelerated plan would create an actual financial emergency for many businesses and potentially provoke action under the next City Council’s term to scuttle the phaseout of the subminimum tipped wage altogether.  

Hearings on this bill saw robust turnout from servers and worker advocates, and so far the proposal has not moved forward.

How gig corporations are trying to undercut a New York minimum wage victory for delivery drivers

In New York, the legislative victory on minimum wage for delivery drivers was followed by a lengthy participatory rulemaking process and several rounds of delays. The New York City Consumer and Worker Protection Board convened three public hearings and conducted a study of the pay and working conditions of nearly 8,000 app-based restaurant delivery workers. The city finally set a watered-down rate of $17.96 per hour, with minimum pay set to increase annually till it reaches $19.96 per hour in 2025.

A few days before the July 2023 implementation date for the wage increase, the major gig companies won a temporary stay order. They trotted out the familiar arguments: “paying workers more will force companies to raise fees on customers and negatively impact revenue, which would ultimately hurt workers.” But tellingly, the companies based their challenge on technical rather than substantive grounds, accusing the government of being “arbitrary and capricious.” In a huge win, a judge denied the legal challenge on September 29, 2023.

This last-minute challenge was obviously a bad faith move, given the years-long public process to arrive at a consensus. An Uber representative even had the gall at a public hearing to encourage the government agency to consider delivery workers’ tips in setting the minimum pay rate.

Delivery drivers, by various estimates across geographies, are already relying on tips to make up 50 percent of their pay. Gig companies are interested in preserving this customer behavior, not for the benefit of workers but for themselves, so they can push their pay commitments even lower. Thankfully, the New York government deemed the employer proposal illegal.

So in both New York and DC, we’ve seen companies respond to an increase in worker power by doubling down. They pass on wage increases to customers and pump up public relations about the supposed harm to their bottom line. We also see them blatantly pushing to lower existing labor standards — whether it’s including tips in delivery driver base pay or tax exemptions for service charges on restaurant bills.

Fortunately, the Department of Labor in NYC and the DC Attorney General have so far come down on the right side. But worker movements have had to expend precious organizing resources to defend these victories rather than tackling the myriad other issues that plague low-wage workers.  

Ultimately, only the weight of federal legislation can end the subminimum wage for tipped workers once and for all and send a clear message to ascendant industries like Uber and Doordash to stop their obstructionist antics.

As long as loopholes like the subminimum tipped wage exist in the law, companies will continue to exploit and expand them, lowering worker pay and standards.