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Tevlin: Perfect storm of minimum wage increase rattles restaurants, wait staffs

  • Article by: JON TEVLIN
  • Star Tribune
  • August 6, 2014 - 12:01 AM

On Aug. 1, Blue Plate Co., which owns eight prominent restaurants in the Twin Cities, welcomed workers with a cheery message congratulating them on the new minimum wage hike.

“Today you are getting a raise!” the memo said, mentioning the additional $. 75 per hour that servers, ­bussers and bartenders will get.

“It is a well deserved raise. We know that you work hard, every shift, every meal, every day. When this raise shows up in your paycheck, we want it to be visible in the warm welcome and bright smile you bring to our guests.”

Those bright smiles quickly turned to frowns for some employees.

Owners David Burley and Stephanie Shimp went on to say that the mandatory wage increase, plus rising expenses due to the health care law, will cost the company $1.25 million.

While Blue Plate will absorb most of that cost, the company also slightly increased prices last week, and now intends to pass along the fees to ­servers when a credit card is used to pay the tip.

Since most customers pay with credit cards, the hit to servers is estimated to be 2 percent of their tips, on top of the taxes they already pay. While that may not seem like much, one employee, who didn’t want to be named, said servers often live paycheck to paycheck, and every dollar matters.

“It’s their choice to accept credit cards, and the customers’ choice to pay with them, it’s not up to me,” the employee said, adding that credit card fees are simply the cost of doing business.

Blue Plate’s response was not the only adverse reaction so far from the industry. In Stillwater, River Oasis Restaurant began adding a “minimum wage fee” to every check, something that drew a backlash on Facebook this week.

The Blue Plate employee also said servers do not currently get company health care, even when they work 40 hours.

But Shimp said that will change Jan. 1, when the health care mandate goes into effect (some employees seemed unaware of that). The company employs about 650 workers, all of whom get a 4 percent 401(K) match, Shimp said. She guessed about 100 workers who are not getting company health care now, soon will.

“It’s almost like a perfect storm,” Shimp said of the changes. “It’s putting a lot of pressure on our business. We look at this like we have to focus on investing in wages and keeping the company healthy.”

In an opinion piece in the Star Tribune last year, Burley wrote that he welcomed the health care changes because he grew up in Australia, which has national health care. But he said taking on wage hikes and health care at once was too much of a burden. The owners also support the wage hike. They have contributed money to Sen. Amy Klobuchar and Rep Keith Ellison, both Democrats and strong supporters of both measures.

So, are they admitting policies they endorse in theory are a burden on their small business in the real world?

“It is, but it’s for the greater good,” said Shimp.

Still, making servers pay for credit card charges seems cheap to some. “We believe that the industry is over ­reacting,” said Wade Luneberg, secretary/treasurer of MN State Council of UNITE HERE Unions. “Putting [minimum wage] fees on tickets and passing the cost on to consumers directly is strange at best, and creates an ‘us against them’ mentality while ordering dinner.”

Luneberg added that Blue Plate joins Parasole Restaurant Holdings in asking servers to pay credit card fees, and notes both are among the most successful restaurants in town.

“Parasole had $30 million in sales last year and just opened a new Tim McKee restaurant in Calhoun Square,” Luneberg said. “Blue Plate just opened a 300-seat facility in the warehouse district with a full brewery. [They also just announced they will operate a restaurant at the State Fair]. Business must be terrible.”

Kris Jacobs, executive director of Jobs Now Coalition, couldn’t cloak her sarcasm.

“You know, rich waitresses are ruining everything,” she deadpanned. “I think this is going to backfire.”

Dan McElroy, president of the Minnesota Restaurant Association, has not heard of any other restaurant issuing a minimum wage fee, and he said that while some have inquired about passing the credit card fees on to servers, “I don’t think it’s widely done in our market.”

McElroy said a 2013 survey found that the average employee in the metro area made $22.38 an hour with wages and tips, $18 outside the metro. He estimated the cost to workers of absorbing credit card fees to be about 30 cents an hour, meaning their actual gain from the wage hike is only 45 cents an hour.

Blois Olson, a public relations specialist who represents Blue Plate, said the owners are good employers who are a “values based, locally owned company” that “invests in neighborhoods.”

Fine, I’ll buy that. But, sorry, pinching servers because someone used a credit card just looks cheap. If, in fact, a 2 percent hit is really no big deal, they should just cover it, if only for the sake of appearance.

“It’s just bad morale when [Burley] drives up in a Porsche, and yet he wants my 2 ­percent,” an employee said.

jtevlin@startribune.com • 612-673-1702 • Follow Jon on Twitter: @jontevlin

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