Making $2.13 an Hour and the Boss Skims Tips? How We Can Fight Exploitation in Restaurants

Tipping catches workers between customer whims and employer exploitation. But some states and businesses are changing their ways.

Photo Credit: Brian A Jackson/ Shutterstock

Two weeks ago, a story about a wealthy California business executive leaving a 1 percent tip on a $133 lunch bill went viral on the Internet. Supposedly, the banker wrote "Get a real job" on the receipt as a smarmy reinforcement of his own status as a member of the 1 percent and as a put-down of the Occupy movement.

The restaurant in question quickly provided evidence that the damning receipt was Photoshopped. But it spread like wildfire because a rich businessman treating a waiter like garbage sounded true to many people. In recent months, the poor treatment of restaurant labor has received increased media attention. People inundate comment sections on blog posts and news stories about restaurants, sharing their own horror stories.

Restaurant labor is classified differently than any other form of work in the United States. Unlike most jobs, where a base wage provides the majority of one's income, federal law allows restaurants to pay as little as $2.13 an hour to waiters, forcing workers to hustle to supplement their meager wages. Regulations do require restaurants to match the minimum wage if the tips do not cover it. But owners often ignore the law as many workers either do not know the law or have no idea how to enforce it.

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Tipping catches workers between customer whims and employer exploitation. Tipping standards vary widely depending on the clientele; how many times have we eaten at restaurants and debated how much to leave as a tip? Mom wants to leave 10 percent, you argue for 20 percent. Some waitstaff do very well with tips. Workers at higher-end restaurants can bring home hundreds of dollars an evening in cash. The tipping system also has benefits for undocumented labor. Often unable to open a bank account because they lack a Social Security number, undocumented workers in restaurants will not even cash their minuscule checks and rely on tips for survival.

But the tipped minimum wage exploits many restaurant workers. Florida lawmakers recently defeated a bill proposed by the Florida Restaurant and Lodging Association that would have reduced waitstaff's hourly wages from the Florida minimum of $4.65 an hour to the federal minimum. Moreover, management at high- and low-end establishments often takes money out of workers' pockets by skimming from the tips. A 2008 court case forced Starbucks to repay $105 million to workers forced to pass their tips up the corporate chain. New York celebrity chef Mario Batali just agreed to pay $5.25 million to workers at his restaurants after they sued, claiming that management took millions in tips from their pockets over the years.

Some states are moving toward better protection for restaurant and other service labor. Rhode Island state legislator Christopher Blazejewski has introduced a bill that would ban restaurants, hotels and other establishments from requiring workers to share automatic gratuities with management. Customers believe these fees are going to workers in lieu of tips; the bill would force restaurants to delineate precisely where the service fees go so that workers can have the opportunity to earn an appropriate tip.

Workers themselves are also fighting for their rights. Restaurants Opportunity Centers United is a nonprofit worker center organizing restaurant labor with locals in eight American cities. ROC organizes around a large number of issues, including sexism and racism within the restaurant industry, acquiring paid sick days for workers, and raising the tipped minimum wage.

Meghana Reddy of ROC-United explained to me that the organization originated to represent the surviving workers of Windows on the World, the restaurant at the top of the World Trade Center, where 80 workers lost their lives during the September 11, 2001 attacks. These mostly immigrant workers needed help navigating the federal aid bureaucracy. Building off this experience, ROC began advocating for restaurant workers' rights, particularly over the tipped minimum wage. After a decade, workers have achieved important gains. ROC-Philadelphia recently successfully lobbied for a city ordinance to stop employers from taking credit card fees out of tips. At present, ROC-United is lobbying for the WAGES Act, a bill sponsored by Rep. Donna Edwards (D-MD) that would raise the tipped minimum wage to $5.50 an hour. It is also protesting the Darden Restaurant Group, a corporation that owns popular chain restaurants such as Capital Grille, Olive Garden and Red Lobster for taking tips from workers and making tipped workers do untipped labor at the tipped minimum wage.

A more radical alternative to tipping is banning the practice altogether. I recently visited the Black Star Co-op in Austin, Texas. The first cooperatively owned and worker-managed microbrewery/restaurant in the United States, Black Star combines the cooperative business model of the 1970s organic food market with the products and services that people want today. After a very good beer and some delicious kimchi fries, I went up to pay the bill. I asked the bartender where I should leave the tip. He proceeded to give me a lecture about how they don't accept tips because they get paid a living wage.

I also talked to Dana Curtis, a former labor organizer for the Communication Workers of America who now works at Black Star. She called it true "workplace democracy," noting that working for a cooperative gives a "sense of agency with your job." Black Star starts workers at $13.50 an hour plus benefits, which works out to three times the rent for a one-bedroom apartment in Austin. Curtis admitted that many restaurant staff can make more than this with tips at higher-end places, but that the workplace democracy attracts highly experienced labor. Moreover, the co-op bylaws state that the highest paid employee can make no more than twice the lowest paid worker. Workers at Black Star are effectively self-managed, electing team leaders with a board-staff liaison, also elected by the workers, that communicates between themselves and the board of directors. Workers can also hold up to three spots on the nine-person board; currently two workers sit on the board.

Were real labor disputes to take place at Black Star, it is hard to say how effective the worker representation would prove. But it certainly provides a better model of labor practices than most restaurants. Ideally, Black Star could spur more communities to open restaurants that combine a cooperative business model with quality food and living wages for workers. That is happening in Grand Rapids, Michigan, where Black Star serves as the model for the soon-to-open High Five Brewery.

Even in a best-case scenario a cooperative model of labor will create relatively few restaurant jobs. We need labor law reforms to bring restaurant wages up to respectable levels. Tipping will probably never end, both because it is so ingrained in American culture and because people like to leave money for good service. But at the very least, we should move to ensure that tipping does not provide another way for employers to exploit workers. The first step is to raise the tipped minimum wage to the federal minimum wage. Second, customers need clarity on where precisely their tips or service fees go. Customers want their tips to go to workers' pockets, not to the managers and up the corporate food chain. Third, the nation needs a strong regulatory agency dedicated to ensuring restaurant owners follow the law with significant fines for violations.

Clearly, as individuals we need to tip generously wherever the practice is accepted. Tipping may have its exploitative side, but refusing to tip would make the diner another exploiter of labor. We need legal and institutional changes to dining labor, not customer opt-outs.  

Erik Loomis is a professor of labor and environmental history and a blogger at Lawyers, Guns and Money.