On August 6, Maricopa County Superior Court Judge Peter Thompson dismissed a complaint filed by Raise the Wage AZ that sought to prevent the Tipped Workers Protection Act (SCR 1040) from appearing on the ballot this November.
Holtzman Vogel partner Andrew Gould represented The Arizona Restaurant Association, and successfully argued that the proposition is not misleading.
Raise the Wage AZ has appealed the decision to the Arizona Supreme Court.
Background
In 2016, Arizona voters approved the Fair Wages and Healthy Families Act, mandating employers to pay at least the statutory minimum wage. This wage is overseen by the Industrial Commission of Arizona (ICA) and is adjusted annually based on the Consumer Price Index, reflecting the cost of living as determined by the U.S. Department of Labor.
Starting January 1, 2024, Arizona’s minimum wage is $14.35 per hour.
Currently, under Arizona law, employers can pay tipped employees up to $3 less than the minimum wage, provided the employee’s total earnings (with tips) meet or exceed the minimum wage for all hours worked. Tip earnings are averaged over the employer’s payroll period or another period that meets ICA regulations to ensure compliance with wage laws.
The Tipped Workers Protection Act
SCR 1040, also known as the Tipped Workers Protection Act, is a proposed amendment to the Arizona Constitution that would allow employers to pay tipped employees up to 25% less than the minimum wage, provided their total earnings, including tips, meet or exceed the minimum wage plus $2 per hour. Compliance would similarly be determined by averaging tips over the employer’s payroll period or another compliance period.
“The ACR 1040 is designed to build that into the Constitution to protect those jobs and protect that structure that we have,” Gould said.
Gould notes that the initiative will safeguard jobs for workers by ensuring they receive fair wages. “It looks out for their well-being while also helping restaurant owners reduce their fixed costs slightly, allowing these jobs to be sustained,” he said.
The Opposition
Raise the Wage AZ argued the proposed amendment violates Arizona Constitution, Article IV, part 2, section 13 and would mislead voters and potentially reduce wages for restaurant workers and others who depend on tips.
According to Saru Jayaraman, the president One Fair Wage, the national organization behind Raise the Wage AZ, the Tipped Workers Protection Act has a very deceptive title and should be called the “Tipped Workers Reduction Act” instead.
Under the new proposed amendment, employers in Arizona (under the current minimum wage) could pay tipped employees up to $3.58/hour less than minimum wage. While the disparity between the current law and the new proposed one is currently $.58/hour, if the minimum wage were to be raised, that disparity will continue to rise with it.
“We don’t think it should be on the ballot because it’s a lie. It’s not a tipped worker protection act. It’s reducing tipped workers’ wages,” said Jayaraman.
She argued that the proposed amendment is remnant of slavery and perpetuates poverty, instability and harassment, especially for women in the restaurant industry.
“We want every state, including Arizona, to have what California and Nevada and Oregon and Washington and Montana and Minnesota already have. Michigan just passed this, which is a full minimum wage, with tips on top. Workers have been suffering living on tips for 50 years and it’s finally ending,” Jayaraman said.
One Fair Wage Act
Previously, Raise the Wage AZ introduced their own initiative, proposition 138, known as the One Fair Wage Act which was also set to appear on the ballot. They recently withdrew the proposition.
The One Fair Wage Act was a ballot initiative aimed at raising Arizona’s minimum wage. It proposed increasing the state’s minimum wage by $1.00 per hour in both 2025 and 2026. Additionally, it sought to eliminate the current allowance that lets employers pay tipped employees up to $3.00 less than the standard minimum wage.
Saru Jayaraman stated that the withdrawal was to avoid confusion and to focus on having Democratic legislators introduce the proposal as a bill. They are also exploring city-specific initiatives to achieve wage increases in several Phoenix areas by spring.
“We did that partly because we don’t want any confusion—we want everyone to vote ‘no’ on a bad bill and then support legislators who will push for better legislation,” Jayaraman said.
Voters to Decide
Arizona has an initiative process that allows the people of the state to create and approve laws and constitutional amendments directly. This process of placing initiatives on the ballot is quite distinctive, according to Gould, with only a few western states having something similar. In most states, you have to go through the state legislature to make such changes.
“It’s important that people understand that our victory in this case allows the people of Arizona to vote on this initiative. It doesn’t guarantee that it’s going to pass; it just gives them the opportunity to vote. I think our win here was a victory for democracy, in the sense that people shouldn’t try to remove or take things away from the voters based on clever arguments or technicalities,” Gould said.
According to an official Superior Court of Arizona document, “The language of the Official Title appearing on the ballot is neither deceptive or misleading in describing the calculation of minimum wages for tipped workers. The Official Title and Official Description of SCR 1040 which will appear on the ballot, do exactly what they say they will do.”
Saru Jayaraman argues that workers, especially post-pandemic, have reached their breaking point. Many realized they couldn’t survive on such low wages and began leaving the restaurant industry. As a result, numerous restaurants were forced to raise wages to attract workers. This has led to a significant shift in attitudes toward this issue, both across the country and in Arizona.
Now, it’s up to the voters to decide what they want to do.
“As a lawyer, I don’t know if they’re going to approve it or not. At least they get the chance to vote on it.” Gould concluded.
