Colorado lawmakers expect to introduce a bill this session that would help ease rising labor costs for restaurants, especially those in cities with high minimum wages.
The bill, sponsored by state Rep. Steven Woodrow, a Denver Democrat, and state Sen. Judy Amabile, a Boulder Democrat, would change a credit calculation that has hiked the cost of doing business in the post-pandemic restaurant industry.
“Our restaurants need help. They are struggling mightily,” Woodrow said Friday. “This bill is about striking the right balance in their labor costs.”
The Hispanic Restaurant Association, a Colorado-based organization, is the lead industry group sponsoring the bill.
“This is not a fight about minimum wage,” said John Jaramillo, co-founder and president of the association. “It’s a fight of how much the restaurants have to pay toward it.”
Right now, restaurant owners with employees who earn tips are allowed to lower their hourly pay by $3.02 to offset the rising minimum wage. That means they can pay tipped employees a base wage of $11.79 instead of Colorado’s minimum wage of $14.81.
The rule was introduced after the state of Colorado updated its minimum wage statute in 2017, when the minimum wage was just $9.30.
Yet as the minimum wage has risen in some cities — by 65 percent over six years in Denver, for instance, to $18.81 — the state’s tip credit has remained the same. Those increasing labor costs are a source of mounting frustration and anxiety for restaurant owners, many of who cite them as the reason for bare profit margins or for closing or moving to other cities.
“It’s had a huge impact overall on the restaurant industry,” Rep. Woodrow said. “It’s one of the reasons we’re getting so many closures.”
His bill would mandate that every city with a minimum wage greater than the state’s offset the difference for restaurants in addition to the $3.02 tip credit. In Denver, where the minimum wage is $4 higher than the state’s, the total tip credit for restaurants could rise to $7.02 for each employee..
As the minimum wage rises, so would the tip credit, according to the bill, a draft of which was reviewed by The Denver Post. After a year, local governments would get the option of raising or lowering the credit, reducing it by no more than $0.50 a year.
The proposal has wide support from the industry, including the Colorado Restaurant Association, EatDenver, the Tavern League of Colorado and other independent restaurant groups, Jaramillo said.
He said he is optimistic that restaurant owners would put the money toward wages for back-of-house employees, such as cooks and dishwashers who do not get tips.
“I’m fairly confident the data will show that. That’s what the mom-and-pops do,” he said.
There is no requirement for them to do this, however. So restaurants could also use the money they would save on rent, the cost of goods or anything else.
Costs have increased across the board for restaurants in recent years, including for rent and ingredients. The picture is particularly bleak in Denver, which lost more than a fifth of its restaurants over the last three years.
The realities are juxtaposed with a much greater focus on Colorado’s cuisine from outside the state. The James Beard Awards are an ongoing occurrence, and Michelin judges began recognizing the state in their guidebook in 2023.
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