Texas Senate Committee Hears Testimony on Controversial Restaurant Wage Bill SB 123
Austin, TX – The future of how restaurant employees are paid in Texas hung in the balance on Friday, May 23, 2025, as the Texas Senate Business & Commerce Committee convened a pivotal hearing to deliberate on Senate Bill 123. This legislation, if enacted, would introduce significant changes to the state’s current tipped wage system, a proposal that has ignited sharp divisions between industry operators and worker advocacy groups.
Chaired by Senator David Lee, the committee room was filled with stakeholders eager to voice their perspectives on the potential ramifications of SB 123. The bill aims to alter the long-standing model where employers can pay tipped employees a sub-minimum wage, relying on gratuities to make up the difference to at least the standard minimum wage.
Industry Leaders Warn of Economic Impacts
Testimony from the restaurant industry painted a stark picture of potential economic hardship should SB 123 become law. Sarah Jenkins, President of the Austin Chapter of the Texas Restaurant Association, was a prominent voice articulating the industry’s concerns. Jenkins testified that implementing the proposed changes would necessitate substantial operational adjustments for restaurants across the state.
According to Jenkins and other industry representatives, absorbing the increased labor costs mandated by the bill is not feasible for many businesses operating on notoriously thin margins. They projected that restaurants would be forced to significantly raise menu prices to offset these costs, estimating an average increase of 10 percent to 15 percent for consumers. This, they argued, could dampen demand and ultimately harm the industry’s overall health.
Beyond price hikes, industry representatives also warned of potential workforce reductions. They contended that increased wage obligations could lead businesses to scale back staffing levels or reduce employee hours to control expenses. This could paradoxically result in fewer job opportunities or reduced earning potential for some workers, despite the bill’s stated intention.
Small Business Owners Share Personal Struggles
The committee also heard poignant personal accounts from small restaurant owners from various parts of the state, including cities like Dallas and Houston. These entrepreneurs shared the challenges of operating independent businesses in a competitive market. They emphasized that already tight profit margins would become unsustainable under the weight of SB 123’s requirements.
Several owners testified that the added financial burden would not only jeopardize their current operations but also derail future plans for expansion, such as opening new locations or hiring additional staff. They argued that while the intent of the bill might be commendable, its practical effects would disproportionately impact local, independent establishments compared to larger corporate chains.
Advocates Champion Stable Wages for Workers
Countering the industry’s assertions, proponents of SB 123 argued forcefully for the necessity of a more stable and predictable income for service workers. Advocates representing the group “Fair Wages for Texas” presented their case, highlighting the inherent instability of relying heavily on customer tips.
They argued that fluctuating tip income makes budgeting, financial planning, and achieving economic security difficult for restaurant employees. Proponents asserted that a guaranteed, higher base wage would provide workers with greater financial stability, reducing dependency on the variability of gratuities.
“Fair Wages for Texas” representatives also presented data suggesting that while some adjustment might be needed, the bill could significantly boost server take-home pay, particularly in urban areas. They cited analyses indicating that in cities, service workers could see their overall compensation increase by up to 20 percent under the proposed system, leading to a better quality of life and reduced reliance on public assistance programs.
Committee Deliberation and Next Steps
The members of the Senate Business & Commerce Committee engaged in extensive questioning of all witnesses. Senators probed the data presented by both sides, seeking clarification on the economic models used to project outcomes and asking for specific examples of how businesses and workers would be impacted.
Questions from the committee touched upon the potential impact on different types of restaurant establishments, the definition of tipped employees, and the proposed timeline for implementation if the bill were to advance. Chairman David Lee guided the proceedings, ensuring that all perspectives were given adequate time and consideration.
Following the lengthy hearing, no immediate vote or decision was announced regarding SB 123. Chairman Lee concluded the session by stating that the committee would “carefully consider all perspectives” presented during the testimony before determining the bill’s path forward. The hearing marked a significant step in the legislative process for SB 123, bringing the contentious debate over restaurant employee compensation into sharp focus within the Texas Capitol.
