McDonald’s CEO Says Tipped Wage Laws Create ‘Uneven Playing Field’

McDonald’s has reportedly come out against tipped wage laws that allow establishments in which workers earn tips to pay their employees less than the minimum wage.

CEO Chris Kempczinski told CNBC Tuesday (Sept. 2) that all workers should be paid at least the federal minimum wage, and McDonald’s withdrew from the National Restaurant Association because of its stance on this issue, the Wall Street Journal (WSJ) reported Thursday (Sept. 4).

Kempczinski told CNBC that tipped wage laws create “an uneven playing field,” according to the report.

The WSJ report said that McDonald’s workers don’t receive tips, that sit-down restaurants have lower labor costs than fast food chains because they can pay a sub-minimum wage, and that some sit-down restaurants have advertised that they can sell burgers at prices that are competitive with those of fast food.

“If you are a restaurant that allows tips or has tips as part of your equation, you’re essentially getting the customer to pay for your labor,” Kempczinski told CNBC, per the report.

While most states allow for the tipped wage, Chicago, Washington, D.C., and around six states have either phased it out or plan to do so, according to the report.

The National Restaurant Association said on a policy agenda page on its website about the tip wage that the rule benefits servers, customers and restaurant owners by enabling servers to earn more than the minimum wage, allowing operators to hire enough waitstaff and keep menu prices affordable.

“Last year, the tip wage was challenged by legislation in 17 states and three cities or counties,” the page said. “In each instance, tipped workers, restaurant owners, the state restaurant association and the National Restaurant Association worked together to stop the legislation and preserve the tip wage.”

PYMNTS reported in August 2023 that the sub-minimum wage for tipped employees creates a bit of a gamble for servers and other employees because their wages depend on how many customers come in during a shift, how much is ordered and whether patrons tip industry standard.

The PYMNTS Intelligence report “Connected Dining: Inflationary Pressure Squeezes Restaurant Tips” found that 39% of consumers were leaving less in tips after a restaurant meal and that many factors that influence consumers’ decisions are outside servers’ control.