Paying $2.13 Plus Tips Doesn’t Cut It Anymore, Investors Say

Investors representing more than half a trillion dollars in assets are urging publicly traded companies to stop paying U.S. tipped workers less than the standard minimum wage.

“The public is paying attention to the treatment of essential workers,” the firms said in a letter, which warns that “companies put their brand reputation at risk by continuing to pay a subminimum wage that impoverishes workers from already vulnerable communities.”

The letter was organized by the firm Adasina Social Capital, which advocates for social-justice issues among investors, and has been signed by around 70 organizations, including Reinventure Capital, Harrington Investments and Zevin Asset Management.

Federal law allows companies to pay tipped workers a lower minimum wage of $2.13 per hour, rather than the usual requirement of $7.25. A handful of states, including California, guarantee tipped workers the same minimum wage as other employees.

The group’s letter argues that reliance on tips creates risks for companies by increasing workers’ vulnerability to sexual harassment and disproportionately holding down pay for women and people of color. In a report released this month by the U.C. Berkeley Food Labor Research Center and the advocacy group One Fair Wage, more than four-fifths of restaurant workers reported a decrease in tips during the Covid-19 pandemic. Nearly two thirds said tips have dropped by at least half. Some said sexual harassment has increased as well.

The letter was shared last month with dozens of publicly traded companies in the restaurant and hospitality industry. None responded, Adasina said.

While the federal minimum for tipped workers hasn’t changed since 1991, last year the Democratic-controlled U.S. House passed a bill that would eventually require companies pay at least $15 an hour regardless of tips. The National Restaurant Association opposed the legislation, warning of “stifling impacts” from increased costs. The Republican-controlled Senate hasn’t taken it up.

©2020 Bloomberg L.P.

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