McDonald’s exits restaurant group as wage rift divides industry

[CHICAGO] McDonald’s pulled out of the trade group that lobbies on behalf of the restaurant industry, in part over a disagreement regarding how workers are compensated.

Executives told Wall Street analysts about the move at a recent meeting, Stifel Financial analyst Chris O’Cull said in a note to clients on Wednesday (Sep 3).

McDonald’s opposes tipped wages, which allow other businesses to count gratuities towards the minimum pay mandated by law. Employers are required to make up the difference if tips are not enough for workers to reach minimum wage. The National Restaurant Association supports the model.

McDonald’s declined to comment. The association could not immediately be reached for comment.

“There’s an uneven playing field,” McDonald’s chief executive officer Chris Kempczinski said on Tuesday in an interview with CNBC. “If you are a restaurant that allows tips or has tips as part of your equation, you are essentially getting the customer to pay for your labour.”

“Everybody should be paying the same minimum wage,” he added.

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The exit of the country’s largest restaurant by sales is a blow to the association, which is the largest lobbying group for the industry at the national, state and local levels.

The trade body was a key advocate for tax provisions that made it onto US President Donald Trump’s spending bill that are seen as benefiting the industry. It also fought against a rule that could have put chains such as McDonald’s at higher risk of being liable for the labour violations of franchisees, who are third-party operators that run most of the Golden Arches locations in the US.

The tipped-wage system got a boost recently when Trump’s spending bill exempted gratuities from taxes, with some limits, a promise he’d made to voters on the campaign trail.

Kempczinski recently said that he supports the provision, known as no tax on tips, but that the chain will not benefit from it because its workers do not accept gratuities. That’s common among fast-food brands.

McDonald’s has engaged with the administration on the federal minimum wage, Kempczinski said. The association has said that tipped workers often make much more than minimum wage. BLOOMBERG