Chicago’s Fulton Market is a restaurant and bar hot spot. |Photo: Shutterstock.
The Chicago City Council on Wednesday voted to freeze a planned phase-out of the tip credit there, though Mayor Brandon Johnson has reportedly pledged to veto the ordinance.
The city voted in 2023 to eliminate the tip credit in a landmark move. The vote came after the Illinois Restaurant Association agreed to drop its resistance to the legislation in exchange for a slow phase-out of the tipped wage over five years.
At the time, employers could pay only $9.48 an hour if the workers averaged at least $6.32 per hour in tips, bringing them to a citywide minimum wage of $15.80 per hour. Under the bill, the tipped wage grew in steps to $12.62 per hour currently, and it was scheduled to jump to $13.59 in July this year.
Restaurant operators, however, have argued that the rising tipped wage has them struggling to survive, especially given the economic downturn in 2025.Â
“Every restaurant worker is already mandated by law to make the minimum wage in Chicago and across Illinois,” said Sam Toia, president and CEO of the Illinois Restaurant Association, in a statement. “However, the continued phase-out of the tip credit will eliminate many of their jobs and cause irreparable damage to Chicago’s world-renowned, independent neighborhood restaurants. We need to freeze the tip credit and give a fighting chance to our restaurants and the dedicated workers they employ.”
The state restaurant association contends 496 restaurants closed in the Windy City in the first half of 2025 alone, and 43% of operators surveyed said they also face permanent closure as a result of the increase in the tipped wage.
City lawmakers appeared to hear that plea for relief.
The council voted 30-18 to freeze the phaseout of the tip credit, leaving the tipped wage where it is at $12.62, which is about 24% short of the full minimum wage of $16.60.
If the mayor does not veto the ordinance, it will be the second time a major city reverses course on eliminating the tip credit.
Lawmakers in Washington, D.C. had also voted to phase out the tip credit there with Initiative 82. But last year the city council approved an amendment to slow and then stop that planned phase out. In the end, increases in the tipped wage will stop when it reaches 75% of the full minimum wage.Â
That keeps the tipped wage at $10 per hour until July 2026 in D.C. Then the tipped wage will increase to 56% of the full minimum wage, and then reach 60% in 2028. At that point, it will increase 5% every two years until it reaches 75% of the full minimum wage in 2034.
Mike Whatley, the National Restaurant Association’s vice president of state affairs and grassroots advocacy said the reversals in Chicago and Washington indicate bipartisan support for keeping the tipped wage.
“We appreciate that so many members of the council were willing to look at the data showing the damage the policy was doing to the city’s restaurant industry and vote to stop the process,” he said in a statement. “We are disappointed that Mayor Brandon Johnson is threatening to continue the policy that is causing his city so much pain. This failed experiment should be a warning for other cities and states considering tip credit elimination.”
UPDATE: This article has been updated with new information from the state and National Restaurant Association.
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