Proposition 138 sparks debate ahead of November Election: How tipped workers in Arizona could be impacted

YUMA, Ariz. (KYMA, KECY) - As Election Day approaches, a new proposition on the Arizona ballot is drawing significant attention.

Proposition 138 could change how tipped workers are compensated, sparking discussions across the state about the potential impact on employee wages and employer practices.

If passed, Proposition 138 would allow employers to pay tipped workers up to 25% less than the state’s minimum wage, provided that the employees' tips make up the difference.

The proposition guarantees that tipped workers earn at least two dollars above the minimum wage by factoring in their gratuities.

Currently, Arizona law permits employers to pay tipped workers up to three dollars less than minimum wage if their tips cover the shortfall.

Supporters of the proposition argue that it will preserve the flexibility of the current system, allowing workers to continue earning substantial income through tips while protecting that income from being taxed or absorbed by employers.

"What Prop 138 is designed to do is protect the current system that allows tipped workers to earn unlimited income from tips without that revenue being swept into the business or taxed," said Dan Bogert, Chief Operating Officer of the Arizona Restaurant Association.

While proponents believe the proposition will protect workers' earnings, critics express concern that it could lead to lower base wages and create inconsistency in pay for workers who rely on tips, which can vary depending on the day or season.

Some workers worry that the proposition may not fully account for the unpredictability of tips. In situations where tips are lower than expected, they argue, the reduced base pay could leave workers with less stable income.

Supporters of Proposition 138 argue that gratuities should not be taxed or treated as business income. Jeff Sarrat, an employee at Lutes Casino, emphasized the importance of keeping tips untaxed, describing them as personal gifts.

"It's like a gift...I shouldn't be taxed on something given to me. A gratuity is just that, and it shouldn't be considered income that's taxed," Sarrat said.

As voters prepare to cast their ballots in November, tipped workers and employers alike are watching closely.

With Proposition 138 potentially reshaping how wages are calculated in the service industry, the outcome of the vote could have far-reaching consequences for both sides.

For many, this proposition represents a balancing act between preserving tipped workers' rights to their earnings and ensuring a fair wage system that supports Arizona's workforce.

Voters will have their say on Proposition 138 come November, and it's clear that the issue has a lot at stake for the state's tipped workers.