One Fair Wage or tip penalty? Debate splits St. Paul service industry

The minimum wage debate in St. Paul has only begun, and already tipped workers are at the forefront.

Two public events this month exposed a divide within the restaurant industry over whether employers should be allowed to pay less than minimum wage, as long as workers make up the difference in tip income.

Proponents call it a “tip credit.” Opponents call it a “tip penalty.”

Whatever it’s called, Minnesota is one of just seven states without one, and that won’t change as Minneapolis’ citywide minimum wage edges closer to $15 over the next six years.

But it’s not for the restaurant industry’s lack of trying. Employers lobbied fiercely for a tip penalty last year in Minneapolis. At the Capitol, they backed Republican lawmakers’ bill to block cities from passing minimum-wage ordinances.

So it’s unlikely the restaurant industry will sit on the sidelines as St. Paul’s newly elected mayor, Melvin Carter, looks to deliver on his campaign pledge to make $15 a reality in the capital city.

A push for ‘one fair wage’

Unions and worker advocacy groups like the Restaurant Opportunities Center United, which is organizing tipped workers in St. Paul, oppose a two-tier wage system. They argue it leaves behind the very workers a minimum-wage increase is supposed to benefit.

“If your business is on the verge of closing because your workers demand to be paid an equitable wage, then you need to think twice about your business model,” said Steven Lewer, a server who lives and works in St. Paul and a supporter of maintaining one fair wage in his industry.

Government data shows job growth in the restaurant industry is outpacing any other area of the economy, but average earnings in the industry – $22,350 per year for full-service waitstaff in Minnesota – are stuck at the poverty level.

That’s why lawmakers in New York, Michigan and elsewhere are moving to roll back tip penalties, ROC United President Saru Jayaraman told tipped workers gathered at the St. Paul Labor Center Jan. 17.

“You as a state have been a shining example for the rest of us,” Jayaraman said. “Why would we consider going backward in St. Paul when the rest of the country is going forward?”

ROC United’s Saru Jayaraman talked with tipped workers supporting one fair wage in St. Paul.

An imbalance of power

Jayaraman presented evidence that restaurant workers in states with a tip penalty experience sexual harassment at nearly double the rate of their counterparts in states like Minnesota. The connection between tipping and harassment isn’t hard to understand, St. Paul server Sarah Kopp-Reddy said.

“When tipped workers rely too heavily on tips, it becomes a lot easier for power dynamics to be thrown off,” Kopp-Reddy said. “When power dynamics are off, servers put up with a lot more. The customer can truly never be wrong.”

Restaurant workers in the U.S. already experience sexual harassment more frequently than workers in any other industry, according to a Buzzfeed analysis of complaints filed with the federal Equal Employment Opportunity Commission. A ROC United survey found 90 percent of women working in the restaurant industry have experienced sexual harassment.

Many employers in the industry, Lewer said, take advantage of workers’ reliance on tips to create a “toxic work environment.”

“Employers will say you’re not smiling enough, or you need to be able to take this harassment you’re getting at the table,” Lewer said. “You’re going to view those things as OK because you need the job, you need the tips. That’s not the way a working environment should exist.”

A split among servers

Lewer and Kopp-Reddy, both 28, see growing support among tipped workers in St. Paul for an ordinance establishing one fair wage, but they acknowledged support is far from universal.

Proponents of the tip penalty staged a public event Jan. 8 at a Cathedral Hill bar, where restaurant owners and staff made the case for paying tipped workers less. Several servers and bartenders expressed concern that their employers would not be able to absorb a higher minimum wage, or that patrons would no longer leave tips.

One shift manager from a bar on West 7th Street spoke on behalf of his wife, a server who, when it comes to higher wages, “doesn’t need it, doesn’t want it.” A bartender from Minneapolis said he’s looking for work in St. Paul now that his hourly wage is on track to increase annually. The owner of a Como Park eatery warned that iPads could replace waitstaff if their wages go up.

Doomsday predictions and scare tactics are a permanent fixture of the minimum wage debate, Jayaraman said, but they aren’t backed up by empirical evidence.

Look no further than Minnesota’s own restaurant industry. The state’s minimum wage has increased by 33 percent since 2014, when state lawmakers passed the first increase in decades. Despite dire warnings from industry lobbyists during the legislative process, employment in restaurants and bars has grown by over 16,000  since 2014, according to data compiled by the state’s Department of Employment and Economic Development. On average, people working in restaurants are earning $57 more per week.

“Tipping isn’t going to go away” as the minimum wage goes up, Jayaraman said. “But no amount of evidence seems to overcome fear.

“What we’re trying to do is offer hope, to let people know that there’s a beautiful future on the horizon in which we, as tipped workers, are treated as the professionals we truly are.”

Nancy Goldman: Increase the minimum wage without penalizing servers

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Nancy Goldman

Minnesota is one of only seven states that does not have “tip credit” or Tip Penalty laws. Minnesota minimum wage was last increased in 2007. As the current legislators look to increase our state minimum wage, which is among the lowest in the country, Hospitality Minnesota, the restaurant employers association, is once again trying to find a way to keep from paying that wage to servers and bartenders, using the same arguments that have proven to be untrue in the past.

One member of our union, UNITE HERE Local 17, recently testified at several minimum wage hearings. Here’s what Nicole Hilgendorf, a server and member of the union, told lawmakers:

“I am a server, and have been on and off for the past 8 years. I started serving while enrolled in college in Wisconsin. Because there is ‘tip penalty’ in that state, my hourly wage was $2.33 per hour. I barely received a paycheck from my employer, as my hourly earnings were just enough to cover taxes on my tips. Therefore, any take home income I received was entirely dependent on tips from customers. On busy nights, this did not bother me much, but on slow nights, this was extremely problematic.

“At the end of the month, if I did not earn enough tip money to cover bills and expenses, I had to pick up extra shifts which often resulted in missing classes, breaking plans, or paying my bills late and incurring penalties and fees. Although tipping is culturally enforced, it is subjective and therefore is not guaranteed. I understand that federal law states that if a tipped employee does not earn the minimum wage from hourly plus tips, the business is responsible to ensure that tipped employees receive the minimum wage rate on their paychecks. This would have been useful information for me to have while working in Wisconsin! Unfortunately, I was unaware of this, and I am assuming many other industry workers are as well.

“After college, I moved to Minnesota. My first job was a serving position. I did notice what I thought was an error in the job posting: it said this position was paid $7.25 an hour. I just assumed it was a mistake, but after 2 weeks, I received a paycheck. And not a voided check or a check for 10 cents, but an actual paycheck! I can honestly say for the first time while being employed as a server, I felt like a valued employee.

“Receiving a minimum hourly wage, in addition to tips, has given me a sense of financial stability. I know that no matter what amount I make in tips, I will at least earn enough hourly to cover my rent. That alone has tremendous effects on my well being, as some of my financial stress is diminished.

“I would like to address a misconception that I often hear: most tipped employees are college students or young people trying to make ends meet while working parttime. This is untrue. Although I do work with students and young people, I also work with people who have families to support, as well as workers that have been in the industry for years or decades, and this is their professional career. Tipped employees rarely receive benefits such as health care, Pension or 401K, and sick days. Many tipped employees just do not get sick, or rather, do not get proper health care when sick and show up to work sick, only to prolong their ailment or worse, spread it to others. Paying tipped employees minimum wage at least makes the out-of-pocket costs more manageable when ill.

“In closing, I would like to remind you that minimum wage is not a livable wage. Tipped employees are not wealthy, nor are they greedy in asking for fair compensation. We are just trying to make a living like everyone else.”

– Nancy Goldman is president of UNITE HERE Local 17.