The Portland, Maine City Council voted unanimously on August 8, 2022, to send five citizen-initiated referendums to voters in the November election.

One of the referendums that will appear on the November 8 ballot – “An Act to Eliminate the Sub-Minimum Wage, Increase the Minimum Wage and Strengthen Protections for Workers” – could have a widespread impact on employers in Maine’s largest city.

Phased-in $18 Minimum Wage

If approved by voters, the Act would increase the minimum wage in Portland to $18 per hour over three years and eliminate the sub-minimum wage for tipped workers over the same period. Thereafter, tipped workers would earn $18 an hour plus tips. It would also provide an $18 minimum wage for workers currently not receiving the minimum wage, including taxi drivers and other ride-sharing services, personal shoppers, and delivery drivers who would be reclassified from independent contractors to employees.

The Act would raise the current minimum wage of $13 per hour to $15 per hour on January 1, 2023. The minimum wage would rise to $16.50 per hour on January 1, 2024 and $18 per hour on January 1, 2025. Thereafter, the minimum wage would rise annually based on a cost-of-living calculus.

The minimum wage would apply to all employers and employees in Portland. The Act defines “employer” to cover all employers regardless of size that maintain a place of business within city limits. It also adds a definition that an “employer” includes “any Driver or Delivery Service that offers services to or from any location within the City Limits regardless of whether it has a physical place of business within the City Limits.” A “Driver or Delivery Service” is any “taxicab service or any same-day app-based delivery, personal shopper service, or personal transportation service provided to individual consumers, including but not limited to third-party delivery, courier, or ride-hailing services for transporting people, food, beverages, groceries, or other goods to or from any location within the City limits.”

Thus, any ride-share or delivery service that drops off or picks up in Portland would have to comply with the new minimum wage regardless of whether it maintains a physical presence in the city.

Additionally, the Act defines “employee” to include full-time, part-time, seasonal, and temporary workers including “any individual who performs work for a Driver or Delivery Service . . .” as well as city government employees.

Elimination of the Tip Credit

In addition to increasing the minimum wage, the referendum would also eliminate the tip credit for service employees. Currently, employers can consider tips as part of the wages of a service employee toward satisfaction of the minimum wage. If the changes are enacted, however, employers in the service industry would have to pay a set minimum wage on a phased-in schedule as follows, with tips on top of the direct wage:

• 1/1/23 to 12/31/23 – Employer must pay direct wage of $10 per hour
• 1/1/24 to 12/31/24 – Employer must pay direct wage of $14 per hour
• 1/1/25 and after – Employer must pay direct wage of at least the minimum wage of $18 or more per hour

The Act would not prohibit tip pooling consistent with the Fair Labor Standards Act.

To enforce the new minimum wage, the Act would establish a Director of Fair Labor Practices in Portland and provide employees a right to file a complaint with the Director. If the Director were to find a violation has occurred, the Director would have the authority to order back wages paid plus a fine of no less than $100 for each day of the violation. It is not clear how this new Director and department would function alongside the state Department of Labor, which is currently responsible for investigating unfair wage practices in Maine.

Ride-Share and Delivery Drivers Would No Longer Be Independent Contractors

The Act would reclassify “Driver or Delivery Service” workers as employees entitled to the minimum wage. This would eliminate their independent contractor status.

The broad change would encompass taxi drivers, ride-share drivers, and app-based shoppers and delivery drivers who transport people or goods to or from Portland regardless of where the driver resides or where the company maintains a place of business.

Given the significant impact that this referendum would have on nearly all employers if passed, employers operating in Portland, Maine should monitor the outcome of the vote and consult counsel to ensure compliance with the local laws.