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Chicago City Council Passes Measure to Create One Fair Wage: No Tip Credit

08 Nov

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Update Applicable to:

All employers and multi-state businesses that have minimum 1 employee in an occupation that customarily earns tips within Chicago City.

What happened?

The Chicago City Council voted to eliminate tipped wages for covered employees working within Chicago by July 1, 2028. The “One Fair Wage” ordinance will gradually phase out covered employees’ wages in which gratuities have customarily constituted part of the remuneration (with exceptions), over a five-year period, starting July 1, 2024, and ending in July 1, 2028, onwards.

What do employers need to do?

Employers should review the resources provided, as well as the Chicago Ordinance to adjust to the wage schedule for tipping employees.

What are the details?

Employers of covered employees in occupations that customarily earn tips (i.e.: hospitality) may take a credit against the standard minimum wage rate if those workers earn enough in gratuities to bring them up to Chicago’s hourly minimum wage. If employees’ tips combined with their direct pay at the subminimum hourly rate do not add up to the standard minimum wage, employers must make up the difference.

With passage of the ordinance the tip credit will be reduced in stages, so that the tip credit to employers may not exceed:

  • 40% of the applicable minimum wage rate until July 1, 2024
  • 32% of the applicable minimum wage rate on and after July 1, 2024
  • 24% of the applicable minimum wage rate on and after July 1, 2025
  • 16% of the applicable minimum wage rate on and after July 1, 2026
  • 8% of the applicable minimum wage rate on and after July 1, 2027, until and including June 30, 2028.

As of July 1, 2028, employers of covered employees in Chicago will not be able to take a tip credit of any amount.

The standard minimum wage rate in effect at that time would apply to all employees, including those in occupations that customarily receive tips. However, servers and other employees in customarily tipped occupations, however, would still be entitled to earn and retain their tips.

Chicago’s new One Fair Wage Ordinance is going to drastically change and reshape Chicago’s hospitality industry.” JDSUPRA.

For more information, please see the links below:

Law firm Articles: Article 1, Article 2, Article 3

News: Article 1

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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