One Fair Wage Used to Promote Service Charges…What Happened?

In recent attempts to eliminate tip credits in Chicago and several Maryland counties, One Fair Wage president Saru Jayaraman vilified restaurants who chose to use service charges as a way to the rising costs associated with tip credit elimination. It turns out, One Fair Wage once endorsed service charges as a way to get more restaurants to adopt their anti-tip credit policies.

Most recently, One Fair Wage spearheaded efforts to get Washington D.C. and Chicago to eliminate their tip credit, despite opposition from actual local tipped employees.

Restaurants and employees warned the public that tip credit elimination would actually leave them worse off, and change the D.C. dining scene by encouraging new service charges, triggering menu price increases, and even forcing restaurants to downsize or close their doors for good. Labor activists at One Fair Wage dismissed these claims, labeling them “fear mongering.”

In a October 12 hearing in Prince George’s County, Maryland, Jayaraman blamed the rise of service charges on the alleged “greed” of restaurants. In her testimony before the county council’s Government Operations and Fiscal Policy Committee, she claimed:

“…When the restaurant association tells workers ‘everyone is going to switch to service charges and you aren’t going to get that money,’ they are essentially telling workers ‘we plan to steal your money, we plan to switch from tips to service charges and then take that money from you.”

Unfortunately, she is forgetting to take credit for her own organization’s idea. In fact, One Fair Wage and partner High Road Kitchens wrote a manual back in 2021 instructing restaurants on how they could change their operations to eliminate their use of the tip credit. Out of three recommendations, they tell restaurants to implement “one fair wage with service charges.”

  • They endorse service charges as “eliminating the unfortunate reality” of biased tipping (another notion that actual tipped employees reject as false).
  • They also concede that service charges are not as beneficial to restaurants as traditional tipping, since the Internal Revenue Service (IRS) taxes service charges as restaurant sales and such charges are not eligible for Federal Insurance Contributions Act (FICA) tax credits that restaurants can use to offset taxes on tips that employees receive.

Now that D.C. diners and others across the country are reacting negatively to the changes tip credit elimination brings, One Fair Wage is changing its tune.

It seems even the anti-tip credit organization itself can’t escape from the economic realities of ending tip credits for restaurants and their employees.