Denver, Boulder restaurants could pay tipped workers less when their gratuities exceed minimum wage under proposed law ...Middle East

A bill supported by the state’s restaurant association could change how tipped workers earn their hourly wage, though most customers probably won’t notice the difference. 

But the subtle shift would make a huge difference to the morale of struggling restaurateurs, and possibly help their bottom line. It could also mean a dip in pay for thousands of tipped workers in Denver.

House Bill 1208, introduced in the legislature Tuesday, would lower the minimum wage for tipped workers in areas that have adopted a minimum wage higher than the state’s, including Denver and Boulder County. Those workers already make $3.02 per hour less than others who are paid minimum wage, with tips – or their employer – making up the difference.

The proposed bill would affect 21,000 tipped workers in the state and lower their pay by an average of $2.50 an hour or $5,000 a year, according to the state labor department. However, if they don’t make that back up in tips, the employer must cover the rest to get them to the state or local minimum wage.

Advocates for workers don’t want any cuts to hourly wages. But for the Colorado Restaurant Association and other business-minded organizations backing the bill proposed by Democrats, the change is about survival of the state’s independent eateries. 

The loss of several high-profile restaurants — such as Fruition from James Beard award winning chef Alex Seidel last month — has been blamed on the convergence of high inflation, labor shortages, local regulations, the slow recovery of business travel and higher wages. But a contributing factor is that tipped wages have increased at a rate higher than inflation and minimum wage itself. 

The bill wouldn’t impact most restaurants or workers around the state — most Colorado communities haven’t opted to raise their minimum wage above the state’s level —  but it affirms in the industry minds that the public is responding to the challenges of operating a restaurant. 

“I was shocked that the Democrats recognized this problem and said, ‘Why is this happening?’ and then listened,” said Mark Berzins, “Lead Dog” at the Little Pub Company, a group of 17 neighborhood bars and restaurants in the Denver area. “They have it right.”

Tipped-worker pay is less than minimum wage, though by federal and state law, an employer covers the difference if the worker doesn’t make enough in tips to get to minimum wage. In Colorado, the tipped minimum is $11.79 — not $2.13 an hour, as it is in Utah, Texas, Wyoming and other states that pay the federal rate.

And in Denver, tipped workers would see the largest drop in base pay, of up to $4 an hour, if the bill passes. The employer still pays them the state-tipped wage of $11.79 an hour and if they don’t make at least $7.02 in hourly tips, the employer would close the gap to get them to the city’s $18.81 minimum wage.

“We are in a very different position today in restaurants and the numbers (of closures) are very staggering,” said Juan Padró, cofounder of Culinary Creative, which operates several Denver restaurants, including Michelin Bib Gourmand winners Mister Oso and Ash’Kara. “You can only cut so much. We’ve lost an entire category of workers. When’s the last time you went to a restaurant and saw a busser? The servers have to do that and not only that, there’s less servers.”

Padró, who has experimented with no tips and service fees, spent the past few years balancing higher costs for food, rent, insurance and other expenses with unpredictability. Last year, road construction reduced traffic at Red Tops Rendezvous, a Detroit-style pizzeria, so he closed it temporarily in June. It never reopened. 

On Wednesday, he told staff that he’s closing the Sloan’s Lake Tap & Burger and selling it to the sports bar chain Stoney’s (“$3 million in sales a year and you can’t make money,” he said). He wholeheartedly supports the bill, even though he says he probably won’t reduce tipped pay by the $4 an hour that the bill would allow.

“I’d probably take $2. I mean, look, you’ve got to do what’s right in your business. But some businesses need that to survive,” said Padró, who opened seven new restaurants last year. “But if Bobby reduces it by $1 and Alex does $4, guess what? They’ll go to Bobby.” 

The rise of Colorado’s tipped minimum wage

In the past decade, Colorado’s minimum wage rose 80%, compared with inflation’s 38.2% increase. 

The statewide minimum wage is pegged to inflation, but it got a boost when voters passed an amendment in 2016 to speed it up to $12 an hour by 2020. It’s now $14.81, more than double the federal hourly wage of $7.25 that hasn’t changed since 2009. 

Tipped wages have risen even faster, especially in cities like Denver, one of the few with its own minimum wage. Since 2015, Denver’s minimum wage has increased 126.3%, while its tipped minimum is up 203.1%. 

The proposed bill has a curious mix of supporters, like Scott Wasserman, former president of the liberal Bell Policy Center, a fiscal policy think tank that advocates for higher minimum wages. He now represents the Hispanic Restaurant Association and still supports raising the minimum wage. 

Smaller restaurants struggle to cover a larger portion of the tipped worker’s base pay each year, plus the rising pay for non-tipped workers, he said. Owners don’t want to raise menu prices but as customers know, that happens. And when it does, the overall bill is higher — and so is the tip. As tipped workers can sometimes make more than managers, the cycle just seems unsustainable, especially for those who want to keep their locally owned neighborhood restaurants in the neighborhood.

The number of active licensed restaurants in Denver has dropped 4.4%, or by nearly 200 restaurants since mid-2023, according to data from the city’s Excise and Licenses department. 

“I’ve been through a number of bills where the industry says the sky is going to fall. Well, the sky has literally fallen,” Wasserman said. “And what we’ve got going for us, in a schadenfreude kind of way, restaurants are literally closing and they are literally attributing it to an increase in labor costs. It’s like Occam’s razor. Why would we ignore the fact that we have rapidly increased the percentage that these restaurants are paying toward minimum wage?”

He shared the financial data of a Denver restaurant he works with. The cost of goods sold has continued to eat up about 29% of the company’s expenses since 2018. But payroll expenses, which were 25.9% of expenses in 2018, shot up 56% and now make up 40.5%.

“The reality is consumers are getting frustrated with service charges and I think the wonks understand there’s a connection between this tip-offset issue and the fact that service charges are being used,” he said. “I think there should be greater transparency, like customers should know what they’re walking into. … But there’s a relationship between employers saying, ‘Well, I’m paying so much for my front of the house that I’ve got to come up with some other way to pay the back of the house.’”

What the bill proposes to change

Tipped workers in Colorado make $3.02 less than everyone else who earns the minimum wage. 

It’s called a “tip credit” because the law allows employers to use tip revenue to offset the obligation to pay a minimum wage. 

The $3.02 has been the same since the state adopted its own minimum wage in 2006. The credit used to offset the employer’s payroll cost for the hourly tipped worker by about 60%. Now it covers 21% of the state’s tipped minimum..

Boulder County and the cities of Denver, Boulder and Edgewater have adopted their own higher minimum wage, but the tip credit has stayed the same, which means employers are closing a bigger gap in those cities. 

The bill would add the difference between the state and higher local minimum wage to the existing tip credit, making the tipped minimum the same statewide, currently at $11.79.

Local governments, if they choose, could reduce the tip credit so tipped worker base pay could wind up returning to where they are today. But that’s limited to 50-cents a year to give restaurants time to catch up. 

Sen. Judy Amabile, a Boulder Democrat and main sponsor of the bill, said it seemed like the best solution for now in her city, which recently adopted its own minimum wage of $16.57. But the city really wanted it to be higher. 

“There was a lot of pushback from the restaurant industry saying, ‘Look, fix the tip credit and then we won’t object to you raising the minimum wage,’” Amabile said.

Boulder, as well as the rest of the state, lacked a mechanism to change the tip credit. That’s why she’s sponsored the bill. Her hope is that if this is what it takes to help restaurants survive and pay non-tipped workers a higher wage, that’ll keep places in business and put people in jobs. 

“When the minimum wage was $6 an hour, the tip credit was $3 an hour. When the minimum wage was $12 an hour, the tip credit was $3. Minimum wage is now $14-something and the tip credit is $3,” she said. “So it isn’t doing what it was designed to do, which was to allow the tips to make up a higher percent of your total earnings.”

State Rep. Steven Woodrow, a Denver Democrat, is another lead sponsor of the measure. 

No one wants a $25 omelet

As costs have risen remarkably in recent years, restaurant owners — like consumers — are looking for every last way to cut costs, increase revenues and just survive. 

Restaurants can only raise prices so much, said Alec Schuler, chef-owner of the three Tangerine breakfast spots in Boulder, Lafayette and Longmont. He’s raised menu prices 4%-6% a year.

“I have one store that makes money but I have two that don’t,” Schuler said. “Costs are just so high. Everything keeps going up in terms of food, we now have paid sick leave, all of my insurances have gone up. … And frankly, we’re not ready for a $25 omelet, which is what I would need to charge if I were to be profitable like I was 10 years ago.”

Ten years ago, labor accounted for about 40% of his regular expenses. “Now I’m pushing 50%,” he said.

For Schuler, who supports the change to the tipped credit, the immediate impact of a new law would be minimal, at least to start. Only one Tangerine is located in a city with a minimum wage that’s higher than the state’s. At this point though, restaurants need to figure something out in order to keep going.

“It’s hitting our bottom line so hard that full-service restaurants are just not that viable anymore,” he said.  “Unless a restaurant is full the majority of the time, it’s not making money. And that used to not be the case.”

Regular wage hikes have caused confusion

Since 2017, tipped staff in Denver have seen their base pay increase by an average $1.25 an hour every year, due to inflation and new laws.The annual changes have also created confusion, which brought this to the attention of the Denver Auditor’s Office. 

The auditor opposes the bill because it would “harm a group of workers who already struggle to make ends meet, increase economic insecurity, create regulatory uncertainty, and interfere with Denver’s democratic process,” wrote Denver Auditor Timothy O’Brien in a letter to lawmakers dated Feb. 7.

The office estimates that 12.7% to 16.3% of workers in the food and beverage industry are paid below the minimum wage each year. Last year, the auditor’s office closed 12 wage and tip-credit investigations at restaurants and related businesses and recovered $192,207 in back pay for workers. 

But many investigations were into companies that didn’t qualify for the tip credit but used it, like a “luxury hotel” that was taking the credit for valet workers, door attendants and bell attendants. Only food and beverage workers are eligible. Marijuana dispensaries aren’t eligible, which Green Cross at Cherry Creek found out after an auditor investigation last year. Green Cross paid $21,431 in restitution to 17 workers.

According to Sara del Valle Ruiz, the auditor’s community engagement specialist, each investigation was different. Some cases, like Tommy’s Thai, were considered unintentional. The restaurant was confused about the laws and paid Colorado’s tipped-minimum rate rather than Denver’s. But others, like Puerto Vallarta, paid the fines for underpaying tipped workers but then didn’t resolve the issue. The auditor’s office had to reach out multiple times, she said. 

Minimum wage or livable wage?

According to the state Department of Labor, there are 85,000 workers who are paid as tipped workers. About 21,000 work in the four counties or cities with higher minimum wages. Three-quarters of them are in Denver, said Scott Moss, director of the state labor department’s Division of Labor Standards, in an email.

Based on today’s minimum wage, the bill could reduce tipped wages between 76-cents to $4 an hour depending on the city. On average, affected workers’ pay would fall $2.50 an hour or $5,000 a year, Moss said.

That’s a fraction of how many workers in Colorado are employed in the food preparation and serving industry. The Bureau of Labor Statistics puts that at 265,770 people, as of May 2023. Between restaurant cooks, bartenders and waiters and waitresses, the median hourly wage was $17.15 and the average was $19.02 in 2023. At the time, Denver’s minimum wage was $17.29.

Today, the city’s hourly minimum wage is $18.81, which is still below what some consider a living wage. And the state’s minimum of $14.81 is below the $15 that workers’ rights organizations have advocated for since 2012.

Saru Jayaraman, president of worker advocacy group One Fair Wage, opposes the Colorado bill because it should not matter if tipped workers keep their tips. She said low-income workers are disproportionally young women of color and single mothers who don’t work at fancy dining establishments. All workers should at least be paid minimum wage and keep their tips, she said.

“It is egregious and horrific that rather than thinking about the forward advancement in the midst of a cost of living crisis for these workers, these Democrats are thinking about a $5,000 reduction in annual income … at a time when they are already struggling mightily with the cost of rent and food and groceries,” Jayaraman said.

Restaurant workers can share tips with the kitchen crew and other nonmanagement staff. But by federal law, that can only happen if everyone receives a minimum wage. 

“As much as these restaurants are claiming that they need to reduce these workers’ wages to create equity with the back of the house, the greatest equity would be for everybody to get an actual minimum wage and then for tips to be legally shared between front and back,” Jayaraman said.

Business owners, however, point out that everybody would still make the state’s minimum wage. By law, if tips aren’t enough, the owner covers the rest. 

Woodrow, the bill’s prime sponsor, said he doesn’t think tips are enough even for folks who make $30 to $40 an hour in gratuities. 

“I would love to see everyone paid more,” he said. “It’s about striking the right balance so that the restaurants can keep their doors open without shedding staff, which they’ve been doing. Yes, there are people going to be impacted by it but I would note that this is a temporary bill. … Local governments that need to increase their tip offset … can scale that increase back by 50 cents a year.”

Berzins, at the Little Pub Company, doesn’t believe there are tipped workers at a restaurant or bar in Denver who don’t make at least $3.02 an hour in tips. He is not counting making sandwiches at Jersey Mikes or handing out a beer at Ball Arena and customers hitting a tip button (“That’s completely different. Tip fatigue is real,” he said).

But say it’s a slow shift at a Denny’s and a server averages one table per hour. If the guest check has two original Grand Slams plus coffee, the check is more than $30.  

“I say do the math,” Berzins said. “People are tipping at a higher rate than ever, mainly because they can’t do math. But let’s say it’s 15%, which would be extraordinarily low. Fifteen percent of that $30 check is $4.50. So if you simply had one table per hour for the time you’re at the restaurant, you’ve made $4.50 an hour in tips. It defies logic when someone tells me that someone at Denny’s doesn’t even make $3 an hour in tips.”

Little Pub, a group of 17 neighborhood bars and restaurants in the Denver area, is doing what it can to “pivot from labor” in order to keep menu prices down, run drink specials and just be that place where people can eat and drink affordably. They’ve switched to QR codes and let customers order at the bar and then find a table.

He shared a document showing what tipped workers make at the 17 bars and restaurants, which all have different names. For the 200 or so tipped workers, the lowest averaged $4.55 an hour in tips. The second lowest was $9.47. The average worker made $31.82 in tips every hour.

If the bill passes, he’d try to figure out how to help out his non-tipped cooks, who start at $20 an hour.

“I want to invest in training for my kitchen staff, and I’d love to have an extra body in the kitchen but I can’t afford it,” Berzins said. “I don’t want to look at any employee and say, I’m cutting your take-home pay. But if I cut their take-home pay so that my kitchen guys can make a little more money or, more importantly, so I could cover health care for my kitchen guys, that’s the right thing to do as a boss.”

Read More Details
Finally We wish PressBee provided you with enough information of ( Denver, Boulder restaurants could pay tipped workers less when their gratuities exceed minimum wage under proposed law )

Also on site :

• Watch Live: American Cardinal Robert Provost chosen as new pope
• White smoke appears over Sistine Chapel as Conclave elects new Pope
• New Pope elected