Grand Canyon Times

Chief Operating Officer of the Arizona Restaurant Association (ARA) Dan Bogert said that restaurants will likely have to adopt new business models if voters fail to pass the Tipped Workers Protection Act (TWPA) in November—a result that would have consumers eating the higher costs of doing business in the state.   

As Arizona voters prepare to cast their ballots, TWPA, or Proposition 138, has emerged as a key issue that could reshape the state’s tipping system and the hospitality industry as a whole.

Currently, Arizona’s tip credit allows employers to pay tipped workers up to $3 less than the minimum wage, with the assumption that tips will make up the difference. Prop. 138 proposes updating this system by adjusting the tip credit to 25% of the minimum wage and protecting it from being eliminated by local governments by enshrining the tip credit in Arizona's Constitution.

This move would also prevent external groups, like the East Coast-based advocacy organization One Fair Wage (OFW), from pushing to eliminate the tip credit at the state and local levels.

Bogert told The Grand Canyon Times that the stakes are high for Arizona's hospitality with regards to Prop. 138. 

"Without Prop. 138 in place, Arizona is open to seeing a tip credit elimination proposal being pushed at the state and local level," Bogert said.

Should the tip credit be abolished, restaurants would likely have to adopt “service included” pricing models, or mandatory service charges, for which customers would ultimately pay. 

Under the current tipping system, restaurant patrons voluntarily tip based on their experience, which is critical in enabling workers to earn more than the state minimum wage. According to Bogert, 90% of tipped workers support this model, and 87% fear that their earnings would drop if the tip credit were eliminated. 

Prop. 138 would not only protect this system but also modernize it by adjusting the outdated $3 tip credit to a percentage tied to the minimum wage. This change would also raise the guaranteed base wage for tipped workers by $2 per hour, ensuring that servers earn $16.35 per hour, rather than the current $14.35.

OFW's effort to include a tip credit elimination measure on the November ballot was successfully challenged in court by the ARA, marking a significant development in the ongoing battle. 

"At the end of the day, this East Coast-based group had to bring in thousands of highly paid signature gatherers to even make an attempt to turn in enough signatures," Bogert explained. 

However, despite a nearly two-year campaign, OFW failed to gather the required number of signatures to qualify for the ballot, effectively halting their efforts for now.