Montgomery County Tipped Minimum Wage Proposal

A new Montgomery County tipped minimum wage could be on the horizon. And it could go away, altogether.

Councilmembers in the Maryland county are considering raising the minimum wage for tipped employees incrementally until it matches the standard rate.

It is worth noting that the bill comes on the heels of the state adjusting its minimum wage schedule to reach the $15 threshold sooner than as the law was initially passed. (Learn more: Maryland Minimum Wage Update.)

Minimum Wage Management. Simplified.

Montgomery County Tipped Minimum Wage

The bill was introduced Sept. 19, 2023, and calls for sweeping changes to the tipped minimum wage in Montgomery County.

If passed, the law would discontinue the tip credit for minimum wage workers as of July 1, 2028.

In the years before then, the county would make aggressive updates to the tipped minimum wage, which is currently set at $4, effective through July 1, 2024. (The county was one of many local jurisdictions that saw July 1, 2023, increases.)

Under the bill to change the Montgomery County tipped minimum wage, the tip credit amount that an employer would be able include could not exceed the county’s standard minimum wage less:

• 2024 – $6
• 2025 – $8
• 2026 – $10
• 2027 – $12

However, the definition of a tipped employee would not change under the current language of the bill and still apply to those earning more than $30 per month in tips.

A Sept. 13, 2023, memo from the county councilmembers in support of the measure outlined their rationale for the proposal to update (and eventually eliminate) the Montgomery County tipped minimum wage:

Washington, D.C., has already led the way in our region, and it is time for Montgomery County to follow suit to ensure our workers are not left behind. In 2022, D.C. voters overwhelmingly voted for Initiative 82 to phase out the tip credit. We believe that now is the right time to take up this issue in Montgomery County before significant disparities are created between workers and restaurants in our region.

As a reminder, the minimum wage rates in Montgomery County as of this writing are:

• $16.70 – large employers (51 or more workers)
• $14.50 – small employers (50 or fewer workers)
• $4 – tipped employees

Lastly, there has been pushback on the proposal from business groups and a public hearing is set for Oct. 10, 2023, at the Montgomery County Council meeting.

Maryland Minimum Wage Rates

Employers in Maryland have three minimum wage laws to monitor.

In addition to Montgomery County, the state of Maryland has its own rate, which updated its law this year.

The previous version of the law set a schedule to ramp up to the $15 threshold in 2025 for large employers and 2026 for small employers. With the passage of the Fair Wage Act of 2023, employers of all sizes must pay $15 an hour starting Jan. 1, 2024. However, the new law also eliminated future rate increases.

State rates, effective Jan. 1, 2023, are:

• Large employers – $13.25
• Small employers – $12.80
• Tipped employee rate – $3.63

The other Maryland jurisdiction with its own rate is Howard County. Effective Jan. 1, 2023, the rates are:

• Large employers – $15
• Small employers – $13.25
• Tipped employee rate – $3.63

Minimum Wage Compliance Resources

Managing Minimum Wage Rates

Managing minimum wage rates has never been more challenging for employers.

Look to the recent activation of an emergency minimum wage rate in Portland, Maine, as a recent example.

With so many cities and counties passing their own rates, it has become cumbersome to manage, as the latest bill from Montgomery County illustrates.

As generally referenced in Employment Law News blogs on minimum wage, there are 130 jurisdictions with a minimum wage rate higher than the federal minimum wage:

• 31 states (including Washington D.C.)
• 45 counties
• 54 cities

Employers that operate in jurisdictions across the U.S. must constantly monitor the lawmaking activity where they have locations.

County and City Minimum Wage Rate Guide

Conclusion

While it remains to be seen whether the Montgomery County tipped minimum wage proposal passes, employers with locations there should keep an eye on its status.

For reference, the county has more than 1 million residents and is just outside of Washington, D.C, and near Baltimore.

This Employment Law News blog is intended for market awareness only, it is not to be used for legal advice or counsel.