Tipping is Not Only Bad for Workers, It’s Bad for Legal Businesses

tipsLittle Rock    Sara Jayaraman, the co-director of Restaurant Opportunities Centers United and director of the Food Labor Research Institute at the University of California at Berkeley recently wrote an impassioned op-ed largely trying to put pressure on Andrew Cuomo, the Governor of New York, to extend the increase in wages from fast food to all workers in the state. She made many excellent arguments including the racialized history of tipping, the progress in Europe in moving away from tips, and the low waged ghettos of largely women workers dependent on tips and often vulnerable because of that dependency, One argument she didn’t make is that by eliminating tipping as part of food service workers pay, we would be bringing the restaurant industry out of the gray market of dodgy, illegal wage practices and putting all businesses on an equal legal footing.

The Fair Labor Standards Act is clear. When tips are part of the income paid the worker, the employer is required to pay withholding, social security, unemployment, and workman’s compensation on the full sum of the wages paid. As every employer knows the full package often is 25% to 30% more than the wages themselves. The FLSA requirement is not just for restaurants using the $2.13 per hour tip credit wage and offset the gap between $2.13 and the federal minimum of $7.25 per hour my adding the tips in, but for all workers no matter what the hourly wages paid and what level of tips are collected.

Logically and justly, this is the way it should be obviously. A food service worker should have the same opportunity for unemployment as other workers and the same opportunity when they reach retirement to collect on their full and actual wages – including tips which often exceed their hourly pay – when they are elderly. The Department of Labor doesn’t live in a fantasy world, and there is no pretense that even a fraction of employers are paying the full package. Basically, they look the other way. There have been enforcement strategies where there has been a mandated percentage, starting at 8%, paid on the assumption of unreported tips dating back more than 30 years. Ironically, there are more rules and enforcement about employers keeping their hands out of the tip pool than there are rules to make employers pay what they are required in benefits for their workers on the tips.

All of which puts legal employers at a huge financial disadvantage in the market. Fair Grinds Coffeehouse in New Orleans is a 100% fair trade, small, social enterprise L3C business, supporting ACORN International’s community organizing in Latin America, India, and Africa. We pay a non-tipped minimum wage of $7.25 and a tip pool adds another $6 to $8 dollars per hour, depending on the season. We pay, as required, the full package of benefits to our workers. We are, in fact, members of ROC, but we are at a huge disadvantage in the marketplace as well.

Arguably, the straight wage is compensated by our community of customers that buy our coffee, tea, and food. The tips are hypocritical gratuity, where on both sides of the transaction the customer and worker pretend it’s a gift, knowing full well that it’s a vital part of wages. Fair Grinds though has no income stream that gives us the money to pay our 30% legal obligation on the tipped part of the wages though. We in effect are subsidizing the “gift” of the customer and the wage of the worker.

Meanwhile Starbucks acts like it’s a hero for paying $10 per hour and like almost all restaurant employers, looking the other way on the tips. And, the small time competitors just look the other way and hope they don’t get caught, while quietly and directly exploiting their workers. Danny Meyer, the big whoop high-end New York restaurateur, has gotten huge publicity for raising wages and eliminating tips at his restaurants and doing so by raising prices. Not sure why he gets praise for this, since he just saved his operation money, because if he were operating legally like Fair Grinds he would have been paying the package out of his own pocket, and now by raising prices he is paying his workers legally out of his customer’s pockets and clearing more money by doing so.

While people pretend to be oblivious of how workers’ pay and employers’ obligations work, social enterprises and straight shooters like a Fair Grinds who are not in a market position to simply charge a premium to cover the costs that our competitors ignore, businesses rip-and-run over their workers and their wages with the implicit permission of lax and lazy government enforcement and explicit support and pretense of their customers.

We need to end tips to put all workers on solid footing and all businesses that employ them on the same even playing field.

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Flyering Door-to-Door is a Constant Neighborhood Education

11096396_1064931363535826_3795957975232855805_oNew Orleans     Opening a new location of our social enterprise Fair Grinds Coffeehouse on St. Claude Avenue in New Orleans was a relief even if we’re still shaking out the kinks, installing the ice machine, this and that.  How we get the word out for our soft opening and early weeks has been a constant conversation filled with many ideas.  One will say how we need to update our social media on Facebook and our website.  Ok, let’s do that.  Another will say, let’s open up for events, a baby shower here, a violin recital there, and a local meeting here and there.  Sounds good, Ok, let’s do that, too.  But, you can’t take an organizer off the streets, so what I wanted was flyers and lots of them and bigger flyers that I could put up on telephone poles, bus stops, and wherever people might gather.  Would it work?  Who knows, but it’s what I know, and what I like, so….

A week of rain finally stopped and I had a commitment from my son, Chaco, to hit the streets with me, so he could take one side, and I could take the other.  I wanted to hit the immediate neighborhood behind our offices and the coffeehouse that was still in the throes of change between a lower income – working African-American neighborhood and the first waves of urban pioneers and families grabbing something semi-affordable in one of our last slivers of a neighborhood in transition, but still close to the French Quarter and the red-hot Marigny and Bywater neighborhoods.  We had cloudy skies, bright pink flyers, and away we went.

Going block to block, door to door, and flyering is always an education, and it’s hard to get one better than street-side.  You miss things from the windshield that are uncovered walking your dogs along the sidewalks and up and down the porches.  The added benefit on a Saturday afternoon is that you also have some stoop sitters, mailbox checkers, and random walkers and workers on the street that can be engaged in conversation.

Until the rain drove us off the turf, Chaco and I managed to cover the grid for an hour.  Almost half the houses are in transition, either “fixed and fine” or under construction in one way or another.  I had not realized this corridor was going so fast.

On the street, neighbors were making the adjustment.  An African-American couple sitting on their porch yelled out at a young 20’s something white couple with the young man uncomfortably wearing a tie, that they looked good dressed up, while the youngsters tried to laugh it off as they walked down the middle of the street.

We had conversations on both sides of the line.  Old residents, some barbequing on their porches or sitting in the shade were uniformly friendly, usually asking if we served breakfast.  They knew our location as next door to the beauty supply house.  Newcomers knew us as next door to the hipster-punk bar, Sibera.

One bicycle rider reminded me that he was already a regular. Right on!  A guy working on his house asked through the window if we were connected to ACORN and then said that he had been a midnight to 2 AM DJ with a woman named May in 2008 and 2009 at KABF in Little Rock, and I told him to get his act together to do the same thing on WAMF once we were on the air in New Orleans.  A big guy bushwacking around the old, abandoned Annunciation church buildings told me it would be some years before they were returned into community service, but they were starting.  He knew about the coffeehouse and returned the flyer so we would save money.  The grandson of the Cuban tire dealer who sold us the building was on St. Rock behind the new food court that just opened, but said he would be by soon for a cup of coffee.  Chaco found outstretched hands from all of the service workers behind the building who were desperate for a place to have a cup of coffee that was away from their workplace.

Raindrops as big a dimes started falling on us as we came back towards the coffeehouse where a baby shower was in progress behind the iron gates and pink ribbons were tied above the sign saying, “closed, open at 6 am.”

We had the flyers out and were really part of the neighborhood, both old and new, now.

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