I recently interviewed a bartender from Denver for a position at L’Oca d’Oro, the Italian restaurant I co-own. When she moved, she had no idea she’d be taking an $8,000 annual pay cut. This is the effect of the two-tiered wage system for tipped employees — and why L’Oca d’Oro and restaurants nationwide are in favor of One Fair Wage, a movement for fair pay in the service industry.
In Colorado, the subminimum wage is $6.28 per hour. In Texas, along with 23 other states that pay under $3 an hour, tipped employees make $2.13 an hour.
The tipped minimum wage started during Reconstruction as a way to “pay” ex-slaves. Pullman porters and other service employees were paid no base wage but were allowed to receive tips. By 1991, the $0 per hour base wage had inched up to $2.13 per hour, or 50 percent of the federal minimum wage.
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In 1996, Bill Clinton signed the ironically titled Minimum Wage Increase Act, separating the tipped minimum from the federal minimum wage. This froze the tipped wage at $2.13 per hour, where it remains. The 2013 Minimum Wage Fairness Act sought to reconnect the two wages and guaranteed that the tipped wage would rise to 70 percent of the federal minimum wage, but Congress never voted on the bill.
As a restaurant owner, I must ensure that our tipped employees make at least $7.25 an hour. If I fail, the burden falls to the employee to make sure that the restaurant makes up any difference. This system leads to hundreds of thousands of dollars in unpaid wage claims every year.
Many underpaid restaurant workers are undocumented and have little recourse. Seventy percent of them are women and, notably, restaurants are the source of more sexual harassment claims than any other industry, according to a 2014 study by the Restaurant Opportunity Centers United, a labor organization. This makes sense. Working for tips means you are working for the customer — and employers have little incentive to side with their expendable $2.13-an-hour employees.
Seven states pay One Fair Wage, meaning they do not allow a subminimum option. While Texas is not one of them, L’Oca d’Oro, Black Star Co-Op and a few other restaurants voluntarily pay all employees at least the federal minimum wage. In March, I traveled with other restaurant owners to Washington, D.C., to lobby for One Fair Wage with Restaurant Opportunities Centers United and learned that there is no one way for every restaurant to tackle this yet.
At L’Oca d’Oro, we pay everyone in the restaurant at least $8 an hour. We include a 20 percent pretax service charge. All kitchen and waitstaff share in those tips. In order to compensate our whole staff equitably, the service charge has to be mandatory, because another law requires that voluntary tips stay with front-of-house staff.
Oddly, the IRS provides a tax break — the FICA Tip Tax Credit — to restaurants for the voluntary tips that are paid out. For going along with tradition, restaurants that only pay the subminimum wage and don’t share tips with their kitchen staffs win this annual federal bonus — a tax break that amounts to tens of thousands of dollars.
At one end of the industry, the National Restaurant Association, representing all the national chains who walked the halls of Congress with us in March, marked by their Dunkin Donuts and Buffalo Wild Wings lapel pins, lobbies for low wages and unregulated factory farms to keep costs down. The lobby for ethical restaurants is not yet so robust.
Low wages and the absurdly low cost of food from factory farms are what makes it possible for most folks to go out to eat at all. But there are hidden costs on both sides of this equation. On the agriculture side, we pay an environmental cost for the groundwater that is polluted by fertilizer and animal waste. We pay with our lives when there are outbreaks of mad cow, listeria and bird flu. On the labor side, we all help support $2.13-an-hour employees who can’t afford health insurance and are on food stamps and welfare.
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We’d like to see the city of Austin create an awards system for restaurants with higher standards. We’d like to see a Central Texas independent restaurant association established to raise the profile of restaurants that are breaking ground in the areas of zero-waste, local sourcing and labor policy.
For decades, restaurants and sustainability advocates have been waging the battle against factory farming and for organically produced, seasonal food. There is much less written about the labor side of the restaurant industry.
When consumers understand more about how their cooks and servers are being compensated, this should pressure local restaurants to raise their standards and put Austin at the progressive end of the national curve — where we belong.
Orman is a managing partner of L’Oca d’Oro.