In Maine, a Minimum Wage Law With a Surprise Inside

In the process of raising their local minimum wage above the statewide minimum, the City Council of Portland, Maine, inadvertently gave tipped workers a huge boost.

A staff member at The Grill Room in Portland seats patrons on July 7.

Photographer: Carl D. Walsh/Portland Press Herald via Getty Images

On July 6, the City Council of Portland, Maine, voted 6 to 3 to establish a local minimum wage of $10.10, a $2.60 increase over the statewide minimum. The next day, the mayor and several council members said they’d made a mistake. The law, which they thought would let restaurants and other businesses keep paying tipped employees $3.75 an hour, actually gave such workers a giant raise—to $6.35 an hour.

Fearful of hurting the city’s restaurant industry, Mayor Michael Brennan and his colleagues on the City Council are working on a new ordinance that would undo the increase for tipped workers before it takes effect on Jan. 1. “I don’t know what else to tell you, other than that when we voted on it, we felt we were voting on what the intent of the council was,” says Brennan, a Democrat. “It was clear afterwards that what we had voted on and the intent of the council were not the same thing.”

Maine’s minimum wage, like the federal one, comes with a “tip credit,” the amount employers can subtract from the minimum wage when paying workers who earn tips. In Maine, where the minimum wage is $7.50 an hour, the tip credit is 50 percent. If an employee’s tips are too stingy to make up the tip credit, employers are supposed to pay the difference to get their total pay up to the regular minimum wage. A 2014 White House study found that workers who are owed a top-off under tip credit rules often don’t get the money from their employers. Not all states have tip credits: Seven, including California, require tipped workers to be paid at least the going minimum wage.

Illustration by Graham Roumieu

Portland council members say they wanted to leave the base wage for tipped workers at $3.75, but increase the top-off requirement so they’d be guaranteed at least the new $10.10 hourly minimum. “To tell you the truth, when I read it, it wasn’t plain to me how it accomplished what we were looking for,” says Councilman Jon Hinck, a lawyer. “It didn’t turn out quite as I anticipated.”

The error was immediately flagged by the restaurant lobby, whose members say they tried to warn Portland’s council members before the vote that the ordinance didn’t say what they apparently thought it did. “It’s very confusing,” says Greg Dugal, chief executive officer of the Maine Restaurant Association. “For somebody that doesn’t even know that a tipped person makes less of a wage than a regular employee, they’re confused right out of the gate, because that doesn’t make any sense to them.”

Labor organizers are delighted. “I think Mayor Brennan and the council should be proud of the mistake that they made,” says Kennard Ray, the national policy director for Restaurant Opportunities Centers United, which argues tip credits leave workers more vulnerable to sexual harassment. Groups like his are mobilizing Portland servers to lobby their council members—all of whom are either Democrats, independents, or members of the Maine Green Independent Party—not to repeal their accidental raise.

Members of the council say they intend to put things right. “Everyone makes mistakes, and I think you just deal with those and go back and correct them,” says Councilman Justin Costa. “Even if that is not the norm at other levels of government right now.”

On June 23 state legislators in Maine voted unanimously to fix a 2013 bill that, because of a drafting error that left out an “and,” deprived an energy efficiency program of $38 million. Republican Governor Paul LePage, who’s been at odds with Maine’s Democratic House and Republican Senate, had unsuccessfully tried to use his veto to block the fix. He now has his own legislative accident: Maine’s attorney general, a Democrat, announced on July 10 that 19 bills would become law because LePage blew a 10-day deadline to veto them. LePage, who says he was within the allotted signing window, has threatened to sue the legislature over the issue. He’s since left another 51 bills unsigned that Democrats say are now law.

A vote on a minimum wage fix in Portland could come as soon as July 20. “There doesn’t seem to be much disagreement on the intent, and we’re not locked in the outcome,” Hinck says. “I think we will be able to fix it without much trouble.”

Before it's here, it's on the Bloomberg Terminal.