• Susan Eder

Everyone has an opinion, or maybe an option?


I recently wrote a commentary that was published in the Star Tribune, which you can find

here. In this commentary, the discussion centers on tips as a supplement to higher minimum wages for the Service staff at restaurants. In Minneapolis, the current minimum wage has already increased to $10.25-$11.25/hour, on its way to $15/hour by 2022. St. Paul is considering a similar plan.

Tips as a supplement to wages is an age-old practice that customers are used to. There are customers who enjoy tipping, as a means of rewarding good service, and these customers may or may not believe that the tips they leave are shared with the entire restaurant staff.

To be clear, under the Fair Labor Standards Act (FLSA), any sharing arrangement among the Servers and Bartenders in a restaurant that permits tipping must exclude the employees who do not "customarily and regularly receive tips, such as dishwashers, cooks and chefs." In addition, a tip "is the sole property of the tipped employee."

This means that Servers and Bartenders, are the only employees allowed to share in tips in a typical restaurant setting where the Kitchen employees do not interact with customers, and that Kitchen wages cannot be supplemented with tips.

Even knowing this, when I go out to eat at a restaurant and leave a tip, there's something in my mind that is hopeful that the tip I leave is supporting the lowest-paid workers of that establishment. Though I know for a fact it's more likely adding to the wage of the highest-paid workers, the Servers and Bartenders.

What we've heard from many Restaurant Owners is that they would like the option of paying all of their staff a fair wage, commensurate with what the employee provides to the organization, and commensurate with building a sustainable employment hierarchy where employees can grow within the organization. Yet, there are not many restaurants in the Twin Cities that have eliminated the tipped service environment. Why? A few reasons.

- Because control over the total amount of funds that are received by a restaurant - both through sales and through tips left on credit cards - are not retained by the Restaurant Owners. Up to 20% of a restaurant's credit card receipts are owned by the Service staff, as tips. The resolution to this would be to eliminate tipping, and instead increase menu prices or implement a mandatory Service Charge, both of which would be revenue streams that the Restaurant Owner can control.

- Because customers don't understand how not to tip. How are workers being paid otherwise, if the customer is not tipping them? How will the Server be rewarded, if not paid by the customer? The resolution to this would be the Restaurant Owner, and the marketplace, would determine the appropriate wage for all employees, including Service staff. Staff that was not willing to work for a set hourly wage would look elsewhere for employment.

- Because the psychology of the customer who spends $50 for food and drinks does not necessarily recall paying an additional $10 on the tip, and may not feel like $60 was too much to spend for that meal, because the tip was not really part of what the restaurant charged them. But a customer who is charged $60 up front for a meal without having to tip at the end of the meal may think that's too expensive, and recalls the $60 spent on the meal, versus the $50 they captured in their mind on the tipped experience.

- Because the risk of losing customers and revenue by becoming a restaurant without tips leads restaurant owners to retain the status quo. Although New York and Seattle have moved to a higher minimum wage and many restaurants have eliminated tips because of that increase, there is still not convincing data, either anecdotally or from adequate studies, to show that restaurants successfully navigate higher wages and retain their profit margins, which are already notoriously slim.

I think we'll organically see a change in how Minneapolis restaurants operate, and there may be some restaurants who fundamentally change their model to a non-tipping environment. But this is a culture change, a large one, and we are only on the bleeding edge of it at this point. Unless a major chain or local independent powerhouse makes the move to eliminate tips, I think we will slowly see the tipping models change, maybe to 10 or 15% of Sales, but that it will take many more city wage laws or even statewide or federal laws changing for this to happen.


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