2019 Brings Minimum Wage Hikes, How Will This Impact Restaurants?

The $15 minimum wage movement has morphed into a force to be reckoned with.

The Fight for $15 worker movement, that started in 2012, led to 20 cities initiating minimum wage increases in 2018.

In mid-February, thousands of fast-food workers gathered in protest in almost 50 cities in support of the $15 wage bump.

In the last few weeks, 20 states have passed legislation increasing the minimum wage, some of which included a tipped wage increase.

In Missouri, the new hourly wage increased from $7.85 to $8.60 and will be raised 85 cents per year until it reaches $12 in 2023. In Arkansas, the minimum wage has been raised from $8.50 to $9.25 and in 2021, it will hit $11.

Although most states are far from the $15 an hour minimum wage, California and Washington are at $12. In Washington D.C., the minimum wage has been increased from $13.25 per hour to $14.

Washington also requires employers to pay tipped employees the full state minimum wage before tips.

Find out what other states increased the minimum wage and the tipped wage in 2019 at "Toast" now.

So what does this ultimately mean for the restaurant industry?

Well, the average 5-6 % profit margin is tough enough for restaurant owners. When the minimum wage increases, the less profitable restaurants will be.

Many operators have argued that increases in labor costs, especially large ones like $15 an hour, like this would not only be detrimental to their business, but the employees would ultimately suffer from weekly hour cuts and even may lose their jobs entirely.

Not to mention, it encourages operators to invest in technology like self-ordering kiosks to cut labor costs.

Watch The Barron Report episode above where Host Paul Barron discusses how this affects the restaurants and that other changes will operators will make to counteract the increase in labor costs.

Trump's New Tip Pooling Rule Means Harsh Fines for Rule-Breakers

Trump's New Tip Pooling Rule Means Harsh Fines for Rule-Breakers

First, the back story:  The Fair Labor Standards Act (FLSA) sets the rules for paying minimum wage and overtime.  It allows employers to take a tip credit against its minimum wage obligations if certain conditions are met.  One of those conditions is that tipped employees must be allowed to retain all of their tips. There is one exception to this – that employers can require employees to participate in a valid tip pooling arrangement.  

There are various requirements for a tip pool to be valid but most importantly, the tips can only be shared with people who customarily and regularly receive tips. Typically, these jobs are in the front of the house.

The FLSA is silent as to whether these same restrictions apply to employers who don’t take a tip credit and instead just pay a full minimum wage.  In 2010, the Ninth Circuit ruled that they don’t apply if you don’t take the tip credit. In 2011, the DOL issued regulations saying that they apply whether you take the tip credit or not.

The Tip Pooling Loophole

In 2017, the Trump Administration proposed a rule that would clarify this issue.  

The rule sought to allow employers who pay a full minimum wage to include back of house workers in a tip pool.  But the rule as proposed left open a potential loophole – that in giving employers control over the tips (under the expectation that they would use them to pay back of house workers) that the rule would have also allowed employers to pocket the tips if they wanted to.  

This prompted an enormous uproar and ultimately the administration scaled back; the law would be revised to make clear that employers cannot under any circumstances keep any portion of their employees’ tips.

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New Spending Bill Bans Restaurants From Skimming Tips

New Spending Bill Bans Restaurants From Skimming Tips

President Donald Trump just signed a $1.3 trillion spending bill into law Friday that included a section that addresses restaurants and makes it clear that employers may not pocket any portion of tips that diners have left for restaurant staff.

Saru Jayaraman, president of the nonprofit Restaurant Opportunities Center said to CNN Money, “We beat them. I think they realized how outrageous what they were proposing sounded to the public, and basically they backed down.”

But that “them” Jayaraman was referring to must have been Congress, as Restaurant industry representatives also showed approval for the rule.

Angelo Amador, senior VP at the National Restaurant Association, argued that most employers wouldn't skim tips even if they were allowed to.

"A decision by a restaurant to retain some or all of the customer tips rather than distributing them to the hourly staff would be unpopular with employees and guests alike, and it could severely damage the public's perception of the restaurant," Amador wrote in his comment on the proposed rule.

The language in the spending bill also does another big thing: It allows employers to pool tips and distribute them among staff, as long as the employer also pays the full minimum wage. Many owners have long sought to boost the pay of kitchen workers and bussers by forcing servers to share their tips.

That's fine with labor advocates at the National Employment Law Project, who say that pooling tips is a good way to create wage equity, as long workers are paid the full minimum wage and tips aren't shared with managers or any other supervisors. "We enthusiastically support this compromise," said Judy Conti, the group's director of federal affairs.

You can read more about the new spending bill and its implications at CNN Money.

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6 Ways to Best Prepare Your Restaurant for Wage Increases

6 Ways to Best Prepare Your Restaurant for Wage Increases

If you haven’t done so already, preparing your restaurant for a regulated wage increase should be near the top of your to-do list, no matter your region. There has been plenty of government level discussions and a ‘movement’ if you will, defining a need to offer better living wages for citizens across North America (and abroad), with a focus on the hospitality industry.

The day is coming if it already hasn’t happened in your area.

Should your restaurant have already been offering what’s called a ‘living wage’? Arguably yes, but the market for years has demanded ‘good food for cheap’ (for the most part) which has dictated the need for restaurateurs to pay out a minimum wage to its hard-working staff.

However, the times are rapidly changing. And that’s not necessarily a bad thing.

Not surprisingly, however, many restaurateurs, potentially ones like yourself have become concerned about the complications a dramatically large increase in their costs will have on their operations.

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GrubHub Drivers Ruled Contractors in Landmark Gig-Economy Case

GrubHub Drivers Ruled Contractors in Landmark Gig-Economy Case

In a landmark ruling Thursday, U.S. Magistrate Judge Jacqueline Scott Corley in San Francisco concluded that a gig-economy driver does not qualify for the protection of employees under California law.

The decision is the first of its kind, setting a standard for arguments regarding “gig-economy” workers.

The gig-economy has gotten much press as of late. With a number of businesses like Grubhub and Uber working off the model of pairing customers with products and services through apps, many workers have found a new form of income allowing high flexibility in exchange for low skill, low wage, episodic jobs.

However, the case against GrubHub, brought on by Raef Lawson, claimed the company violated California labor laws by not reimbursing his expenses, paying him less than minimum wage and failing to pay overtime. His argument was based on the idea that Grubhub exerts a certain level of control over. The company expects drivers to be available to accept assignments during shifts they sign up for and to remain in designated geographical areas.

Lawson worked as a food-delivery driver with the company for less than six months while pursuing a career as an actor and writer.

At a hearing in October, Judge Corley expressed concern that Lawson’s resume filed with the lawsuit may have tainted the trial because the actor lied about completing a three-year program. The specifics of the program weren’t provided. However, Corley said Lawson was “dishonest” and that the resume “is really problematic to me.”

Charlotte Garden, an associate law professor at Seattle University, said to Bloomberg that Corley’s decision is a “doubly big” win for GrubHub since California’s relatively high standard for establishing workers as independent contractors will mean similar arguments in other states will most likely side with this ruling.

You can read more about this case at "Bloomberg."

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