Senate Bill 2784 has divided employees and employers over whether to pay tipped employees at least Hawaii’s minimum wage and has been deferred for a second time.

According to SB 2784, allowing tipped employees to earn Hawaii’s minimum wage — which is currently $14 an hour — in addition to tips would “strengthen the financial security of service industry employees.”

Thomas Jones, spokesperson for the Hawaii Restaurant Association, testified in opposition to SB 2784 on Wednesday before it was deferred to a vote by the joint session of the Senate Labor and Technology and Ways and Means committees, which voted Friday to defer another vote to today.

“Of all employees, I think the servers that are tipped probably need the least amount of protection, not the most amount of protection,” Jones said.

Servers in the restaurant industry earn the highest incomes, when tips are taken into consideration, he said.

SB 2784 would repeal Hawaii’s so-called tip credit that allows restaurants to pay tipped employees less than the state’s minimum wage.

“I can understand philosophically why people might feel that the tip credit isn’t appropriate,” he said. “However, when you look at the practical reality of who gets paid and how much money they make, servers are in a really good situation.”

State Sen. Kurt Fevella (R, Ewa Beach-Ocean Pointe-Iroquois Point) pushed back against Jones’ position during the bill’s first hearing during Wednesday’s joint session of the Senate committees.

“Thank you for your passion in the wrong way,” Fevella told Jones.

Fevella hoped that lower-­income employees in communities including Waipahu, Ewa Beach and Nanakuli would get some income security through SB 2784, which was introduced by state Sen. Henry Aquino (D, Pearl City-­Waipahu-West Loch) as part of a package of bills supported by the Legislature’s Filipino Caucus.

“It’s not like it’s free money,” Fevella said. “You acting like the tips is free. They still gotta pay taxes on the money.”

Leif Salveson testified in support of SB 2784, renaming the tip credit as a “tip rip-off” because it allows employers to keep $1.25 from their employees’ hourly wages, resulting in over $2,600 of annual wages retained that would otherwise have gone to full-time tipped workers.

“It is unjust to punish workers for providing good service while financially rewarding employers through the tip rip-off,” Salveson said in written testimony.

He called the practice a “direct legacy of slavery in the United States.”

Following emancipation, the restaurant industry sought to hire Black women without paying them, forcing them to rely upon tips to survive, Salveson wrote.

“We have a moral duty to cast off the remnants of slavery,” he wrote.

Russell Ryan, chief financial officer for the Highway Inn restaurant in Kakaako, testified in opposition that the “Tip Credit must be the most misunderstood concept in Labor Law.”

According to Ryan, the tip credit also supports back- of-house staff, who would make $40,000 less than servers annually.

The tip credit allows restaurants to pay all staff “equitably,” Ryan said.

“The Tip Credit is not a mechanism for management to steal the wages of the lowest paid, as some would have you believe — it is simply a means for restauranteurs (sic) to even out the massive wage disparities between tipped and non-tipped staff,” Ryan wrote.

Ryan later told the Honolulu Star-Advertiser that one server at Highway Inn made about $70 an hour, including tips.

“Our highest-paid server — who is a single mom, by the way, and an immigrant — made about $200 shy of $90,000 on her W-2” while earning a base pay of $11 an hour, he said.

He said in written testimony, “Servers care more about tips than their minimum wage and would likely not worry if the Tip Credit was 50% of their minimum.”

Dakota Birgado-Tavares, 22, has worked in restaurants on Oahu since moving from Hilo in 2020.

“I don’t have much disposable income, so I can’t afford to buy the resources like a laptop or books for school, and it’s hard to work and pay for both school and life at the same time,” he told the Star-Advertiser.

Without a college degree, restaurants offer the simplest work to earn the most money, Birgado-­Tavares said.

Birgado-Tavares lives in Waipahu on rent of $1,200 a month, including utilities.

But he prefers to work in town despite the long commute because of the higher tips he can earn.

While employed at the Old Spaghetti Factory in 2020, Birgado-­Tavares said, he earned $9.35 per hour as a food runner.

He sometimes would end a five-hour shift with $20 in tips, adding up to only $13.35 an hour.

Restaurant work, Birgado-­Tavares said, often required him to “stand and run around on my two feet the whole shift and always keep a happy face to customers” while sometimes earning less than minimum wage.

Birgado-Tavares also worked at Tanaka of Tokyo for over a year, where he said he made “pretty good money compared to other places,” earning $1,200 to $1,600 every two weeks as a lead server.

He empathized with his co-workers who made less and were “so tired after their shift and had to deal with harassment from customers and find out they only made $10 in tips.”

Birgado-Tavares acknowledged that SB 2784 might have unintended consequences, such as higher menu prices that could reduce tips and discourage customers from dining in.

Hiroshi Lamansky, president of Tanaka of Tokyo, told the Star-­Advertiser that tipped staff make “anywhere from $28 to $42 an hour” on the hourly base wage, including tip credit and tips.

Across its three locations, Tanaka of Tokyo has 159 employees, 115 of whom are tipped.

While Lamansky said he “believes in fair wages,” he described SB 2784 as leading to a “vicious cycle” that could harm the company and cause a backlash for employees.

“It will add to our payroll expenses. Every single restaurant would kind of confirm this threat — the cost to operate,” he said. “It’s the highest it’s ever been. The only way to really offset that would be to increase menu prices, which we hate to do and only as a last resort.”

Raising menu prices would mean that it would be a “matter of time before the restaurant goes out of business.”

Fevella said Wednesday that employers can make up their own statistics because they’re on “the other side of the food chain.”

“I’m upset because we should have done this last year,” Fevella said before raising his voice and knocking on a committee table.

“We gonna keep on doing this, and the rich get richer and the poor, shove it,” he said before abruptly leaving the conference room.

Fevella later returned and apologized, saying he was upset because some restaurants “steal” employees’ tips.

“You give them the opportunity to take these tips and the tip penalties or tip rip-off, that’s where all the opportunity comes,” he said. “I’m not saying all restaurants are dirt-bags, but we get the ones out there that is prying on our waitstaff, waiters and waitresses.”