This may come as a shock to some but there’s a different minimum wage for restaurant employees than for workers in most other industries. In Pennsylvania, for example, that minimum wage is just $2.83 per hour.
Every statein the US has these “tipped wages”. According to minimumwage.org, the tipped wage is as little as $2.13 per hour in 19 states and as high as $10 in New York.
Here’s how it works in Pennsylvania: restaurant owners here have to pay their workers just $2.83 per hour (the federal minimum) as long as those employees receive enough tips so that their total hourly wage exceeds the state (and national) minimum of $7.25.
There is a logic to this. State-based tipped wage rules are designed to allow restaurant owners to lower their payroll costs and let customers make up the difference.
To me, it’s all still woefully too little, but most restaurants take advantage of these tipped wage rules. And who can blame them? It’s legal and common and a significant help towards keeping overhead (and prices) under control. You would think that having to pay an employee a mere $2.83 an hour is enough of a saving. Unfortunately for some restaurants owners it’s not. So they steal.
For example, there’s the Bottle Bar East restaurant in Philadelphia, which last week was found in violation of these wage (and other) rules and ordered by a federal judge to pay $246,457.99 in back wages, as well as an equal amount of liquidated damages and civil money penalties to 73 bartenders, servers, cooks and dishwashers. Some employees were owed as much as $42,000. I live in Philly. I won’t be eating there.
I love Italian food, but I won’t be eating at Maggiano’s near the convention center in Philadelphia either. Why? Because, back in April, the geniuses running that location were ordered to pay $116,308 in back wages for wage theft that affected 82 workers. The restaurant chain grossed more than $400m in sales in 2019.
Business owners are being accused of stealing from their employees wherever you look.
A class-action lawsuit filed in New York against a popular steakhouse alleges “wage theft and other illegal practices that shortchanged staffers’ pay,” which affected approximately 50 current and former employees. A San Francisco restaurant agreed to pay 22 workers roughly $73,000 each for wage violations in a settlement to avoid a costly lawsuit. Two well-known eateries in Nashville agreed earlier this year to pay a combined $1.03m to settle separate lawsuits alleging tip and wage theft. A casino in Pennsylvania agreed to pay $6m to settle a class action lawsuit alleging a failure to pay its tipped employees the proper amount under federal and state law.
There are explanations for these shenanigans, and none of them good. Maybe the pandemic put so much pressure on some restaurants that the managers thought that shortchanging employees could help them survive financially. Perhaps their point-of-sale systems were inadequately set up to track tipped wages. Or maybe these same managers were simply taking advantage of their employees’ trust and thought they could get away with it.
One thing’s for sure: those employers are stupid.
Haven’t you seen the news? Good employees are in short supply and that situation isn’t going to significantly change any time in the near future. Not only that but thanks to the pro-labor Biden administration, you can count on an uptick in the enforcement of wage and other employment rules during the coming years. If you own a restaurant or a business that employs tipped workers, you better make sure you’re educating each and every one of them as to how their pay rate is calculated. You better make sure your systems are in order. You better pay special attention to “pooled tips” and overtime pay. Oh, and one other thing: you better make sure not to steal from your workers.
It’s a very bad idea to play games with your employees’ wages. Getting caught will result in significant penalties and a lot of bad press. But even more importantly it’s almost guaranteed to ensure that the best workers will avoid working for you. And customers will avoid you too.