Restaurant Association Metropolitan Washington

ACT NOW: Defeat the City Council's Tipped Minimum Wage Bill

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Restaurant Association Metropolitan Washington
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Dear Members of the Council:

In September, a bill was introduced which proposes to increase the tipped minimum wage in the District of Columbia. Now you are in the middle of a contentious conversation with many advocates, claiming to be experts, who are urging you to pass this bill. The Restaurant Association Metropolitan Washington (RAMW), our more than 850 members in the DC Area, and the entire restaurant community for which we speak, would like to politely remind you that we are the restaurant industry and we are the experts on how our industry works.

The advocates – policy groups, radical labor unions, and for-hire rally-goers – do not work in the restaurant industry. They are advocating for the fix of a system that is not broken. We, RAMW and our community, are relying on you, our elected officials, to pay attention and know the difference between loud advocates who claim they represent an industry and the restaurant industry itself.

Our industry is working, employing over 60,000 people in the District of Columbia, and our employees are getting paid well. Our members are entrepreneurial businessmen and women who, almost without exception, started with an idea, too little capital and a passion for food and hospitality. In many instances, these risk takers are the backs upon which our great neighborhoods have been built---the area around 14th and U, the Navy Yard, Shaw, Bloomingdale, H street, N.E. and Barracks Row, just to name a few, have all experienced renaissances thanks in large part to a vibrant neighborhood restaurant economy.

We have witnessed a spectacular growth in employment in the restaurant industry and sales taxes paid by hospitality businesses have skyrocketed. Our workers, especially our tipped workers, are very well compensated. We know of no tipped restaurant workers who earn less than the current overall minimum wage of $8.25 an hour. Restaurant employers pay their tipped employees $2.77 per hour as base minimum wage and then employees earn tips. The average hourly wage for tipped workers nationally is $16 to $22 per hour, and is higher in the District. On the very rare occasion that a tipped employee does not make enough tips in a work week to equal $8.25 per hour, the employer pays the employee to make up the difference.

Why are you spending so much time debating the wages of a group of employees who are not in need of protection and who often make more than their managers? You should not pass a bill based on passionate advocates who, in this case, are wrong. And, you should not pass a bill that changes the entire way a thriving industry pays its employees based on a rumor – purported by the advocates – that restaurants do not pay their employees properly. If their well-being is in question, we would be concerned as well. Our members have a sincere investment in their employees, especially at a time when competition is making it harder than ever for operators to hire and keep good staff. Quiet the advocates who are talking in your ear and look at the facts for a moment.

The objective data tells the story. The Department of Employment Services (DOES) is charged with enforcing the laws governing minimum wage. DOES responds to and investigates complaints of instances where employers pay employees less than the minimum wage, including those of tipped workers. It is certainly telling that DOES has virtually ZERO complaints from tipped workers who claimed not to have received the overall minimum wage, when their tips are counted. As there is no evidence of noncompliance with this law in the past, there is no reason to believe it will be violated in the future. And, if there were evidence of bad apples not adhering to the law, raising the tipped minimum wage does not fix that.

You must understand that across this entire country, tipped workers are mostly compensated by money that is never received by the restaurant operator. Instead, servers and bartenders establish a relationship directly with customers, who compensate them with tips. In most cases, this provides an opportunity for servers and bartenders to earn many times the minimum wage, and they prefer it that way.

If you vote to increase the tipped minimum wage, it will require operators to “find” money to pay the higher wages. There are four potential sources:

1. Take it off the bottom line, and earn less. In an industry with average net profit margins of 3-5%, however, that is not possible to sustain a business.

2. Raise menu prices to cover these increased mandated costs. There are, however, limits to what consumers will pay to dine out, and increased competition makes it uncertain that diners will keep coming back if prices are raised.

3. Reduce staff hours and/or reduce the number of employees, and compromise service.

4. Those three undesirable options inevitably cause restaurant operators to seriously consider a fourth option. Reconsider the current system of compensation of servers and bartenders by adopting the European system of mandatory service charges paid to operators, with hourly wages paid to servers and bartenders.

All four options conflict with the goals of the District and Mayor Vincent Gray’s Five Year Economic Development Strategy for the city. The resulting four options hurt small businesses, certainly do not encourage growth and employment, and directly decrease the earnings of the workers whom these laws are supposed to protect. You should not pass a bill without considering the inevitable outcome of your decision.

Our current system works very well. All the evidence shows that tipped workers are well compensated. There is no objective evidence that there has been wholesale abuse of the tip credit system. There is no basis for an increase in the tipped worker minimum wage. We provided evidence, in the form of letters, testimonies, and actual time sheets from restaurant operators’ payrolls. We testified at Councilmember Vincent Orange’s October hearing and now we are joining our collective voices, by way of this letter, to once again tell you to please listen to US – THE RESTAURANT INDUSTRY OF THE DISTRICT OF COLUMBIA. Our community presents this letter to you as a petition, signed by members of the restaurant community who share this position.


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