Pay | KRG Hospitality

A frustrated cartoon slice of pizza carrying a suitcase and leaving the state of California

June 14, 2024by David Klemt David Klemt No Comments

FAST Act Fallout far from Finished

FAST Act Fallout far from Finished

by David Klemt

Have you ever seen a more frustrated slice of pizza in your life? I doubt it.

The battle over the implementation of California’s FAST Act appears to be heating up further, with multiple parties attempting to land blows on one another.

Depending on the source, the Golden State’s fast-food minimum-wage hike to $20 per hour is either killing jobs or adding them. One side says that limited-service and quick-service restaurants have shed nearly 10,000 jobs since Governor Gavin Newsom signed the FAST Act into law.

On the other side, proponents are pointing to data the Bureau of Labor Statistics (BLS) released recently to paint the situation in a better light. According to this data, LSRs in California added 4,500 jobs between September of last year and April of this year.

However, those unhappy with the FAST Act have downplayed this net gain in fast-food jobs. According to reports, that increase in jobs represents a recurring seasonal trend. Further, some sources claim that the data showing a gain in jobs includes restaurants other than LSRs, so the information is being spun to look positive.

One group is so unhappy with Gov. Newsom’s implementation of the FAST Act, they released an obituary-style ad to make their grievance known.

“In Memoriam”

Below, a social media post displaying the “in memoriam” ad from the California Business and Industrial Alliance (CABIA).

📢 Today, we called out @GavinNewsom in a full-page ad in USA Today for the harmful impact of California’s recent minimum wage hike on fast-food restaurants. Nearly 10,000 jobs lost since AB 1228 was signed into law. CA deserves better policies that support growth and stability.… pic.twitter.com/CCpAk3L2j0

— @cabia (@cabia_speakup) June 6, 2024

The full-page ad is available for viewing here.

Jonathan Maze, editor-in-chief of Restaurant Business, also spoke out against California’s $20 minimum wage for fast-food workers.

During an appearance on FOX & Friends First, Maze addressed how the state handled the pay hike.

“You’ve got two issues, really. You have the fact that it was done almost overnight,” said Maze. “You have the fact that it was a 25-percent increase in the wage rate. Both of those things happening simultaneously, is a really hard thing for restaurants’ bottom line, and you’re seeing the effects of it.”

Brand Relocation

In a development that won’t assuage Gov. Newsom’s critics, a California-born fast-food brand has announced it’s leaving the state.

Blaze Pizza, which opened its first location in Irvine, California, in 2012, has announced the relocation of its headquarters to Atlanta, Georgia. Currently, the brand’s headquarters is located in Pasadena. The move will take place later this year, and it’s not expected to impact the company’s roughly 7,500 employees.

It will, however, impact Blaze Pizza’s taxes. Moving to Atlanta will reduce the QSR’s corporate tax rate by at least a third.

This begs a couple questions: Is this simply a business-savvy move that will reduce Blaze’s taxes and allow it to allocate more resources to further the brand’s growth? Or did the brand analyze the FAST Act’s impact on its bottom line and decide to flee the state for greener pastures?

One can argue the situation is closer to the former than the latter, as Blaze has stated that store-level employees won’t be impacted by the reorganization.

But on the other side of the coin, one can argue the move to Atlanta is a direct response to FAST. Cutting taxes by a third (if not more) may help Blaze avoid restaurant-level job cuts or store closures.

Messy

One thing is mostly clear regarding California and the FAST Act: the situation, so far, is messy.

The tendency is usually to say that as things play out, data will tell the tale. Unfortunately, as this situation is showing us, that’s not always the case. Data is being spun to support agendas.

One thing I’ll say is that I’m happy some fast-food workers’ lives are improving. Or, at least their wages have gotten better. But, of course, if their employers are cutting hours or eventually closing stores, is that improvement sustainable?

And then there are the guests. Reports appear to indicate that more and more Americans now perceive fast food to be a luxury. That doesn’t bode well for LSRs and QSRs in California in particular, nor for fast-food operators across the US.

This situation is complex, with many factors impacting California’s restaurant workers, operators, and guests. We likely won’t know the true impact of the FAST Act until the end of this year, at the earliest.

Other states looking at implementing similar measures should keep their eyes trained on California before moving forward. Legislators need to meet and actually listen to independent and chain operators, along with people representing the workers in good faith.

Image: Shutterstock. Disclaimer: This image was generated by an Artificial Intelligence (AI) system.

AI-generated image of a $20 bill with a cheeseburger covering the president's face, in street art style

April 17, 2024by krghospitality krghospitality No Comments

Rocky Start to Cali’s Fast-food Wage Hike

Rocky Start to California’s Fast-food Wage Hike

by David Klemt

I instructed AI to draw a cheeseburger on a $20 bill, in street art style. Enjoy.

We’re barely two weeks into the $20-per-hour wage hike for fast-food workers in California and not everyone is happy with the results thus far.

That is, of course, if reports are accurate. However, the stories coming out of the Golden State are raising eyebrows.

On April 1, the minimum wage for fast-food workers in California jumped to $20 per hour. On the surface, AB 1228 appears to be a victory for hourly hospitality professionals employed by fast-food concepts.

Unfortunately, once we go beyond the surface, things aren’t that cut and dry.

Operators in California are implementing all manner of adaptations in response to the state’s minimum wage boost:

Increasing menu prices.
Cutting staff hours.
Reducing staff.
Decreasing operating hours.
Closing one or more days of the week.
Postponing updates and upgrades.
Focusing on delivery.
Introducing automation.
Putting items that require less labor on the menu.
Closing locations permanently.

It should go without saying but a wage increase doesn’t do much good if one’s hours are reduced significantly. Further, it does zero good if one’s employer shutters the workplace.

Per reporting, that’s precisely the situation team at one Fosters Freeze location is in currently. On April 1, workers at a Lemoore, California, location received a group text explaining that their restaurant was closing permanently. Understandably, some staff thought the text was an April Fool’s Day prank.

Certainly, the Lemoore Fosters Freeze isn’t the only restaurant closure related directly to the minimum-wage hike. Nor, it seems, will it be the last.

More Pain Points

When people hear about fast-food menu price increases, the assumption is that guests will reduce visits. Or, perhaps they’ll adjust their usual order. Alternately, some people anticipate guests will give their business to a different fast-food brand.

However, there’s another result that some fast-food operators in California are anticipating or experiencing already.

At a certain point, perception of value is affected negatively. Eventually, a consumer will perceive more value in visiting a full-service restaurant than a QSR or LSR. So, it’s likely that fast-food operators in California will lose guests to traditional “sit-down” concepts.

Should that possibility become a reality, traffic will drop. When the traffic drops, workers’ hours are reduced. Some operators, therefore, will lose staff to FSRs; people need to go where the work and money are, after all.

So, beyond the need to adapt to comply with the new minimum-wage law, fast-food operators must compete with FSRs to keep staff and guests.

What’s a Fast Food Restaurant?

Curious about how California defines “fast food restaurant” in AB 1228, I looked up the text of the bill.

The relevant parts are found under section 1474:

“(a) ‘National fast food chain’ means a set of limited-service restaurants consisting of more than 60 establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services, and which are primarily engaged in providing food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming, with limited or no table service. For purposes of the definitions in this part, ‘limited-service restaurant’ includes, but is not limited to, an establishment with the North American Industry Classification System Code 722513.”

1474 also includes the following:

“(c) (1) Except as provided in paragraph (2), ‘fast food restaurant’ means a limited-service restaurant in the state that is part of a national fast food chain.”

Interestingly, there’s also this exemption:

“(2) ‘Fast food restaurant’ shall not include an establishment that on September 15, 2023, operates a bakery that produces for sale on the establishment’s premises bread, as defined under Part 136 of Subchapter B of Chapter I of Title 21 of the Code of Federal Regulations, so long as it continues to operate such a bakery. This exemption applies only where the establishment produces for sale bread as a stand-alone menu item, and does not apply if the bread is available for sale solely as part of another menu item.”

Further, AB 610 carves out more exemptions.

Accusations of Corruption

The bakery exemption is fueling accusations of corruption.

Per reports, the exemption is quite favorable for Panera Bread. Why is that particular chain being held up as an example of special treatment and corruption?

As it turns out, should reporting prove accurate, a Panera Bread franchisee and billionaire named Greg Flynn is a Governor Gavin Newsom campaign donor. It’s claimed that Flynn has donated more than $200,000 to Gov. Newsom.

Last month, Flynn, in response to what has been dubbed “PaneraGate,” stated that the minimum wage at his franchise locations would rise to $20 per hour. This announcement was, Flynn claimed, to remain competitive, and in no way a reaction to the controversy surrounding what many perceived to be a favorable exemption for a donor, high school friend, and past business partner.

Again, California is barely two weeks in to this mandated pay rise. To say it’s early days is an understatement. There will be further consequences and adaptations for months and years to come.

So far, however, while many workers and even business owners are happy with the new law, some are already sounding alarms and pushing back.

Image: Shutterstock. Disclaimer: This image was generated by an Artificial Intelligence (AI) system.

February 14, 2024by David Klemt David Klemt No Comments

TOTCF Unveils National Policy Initiative

TOTCF Unveils National Policy Initiative

by David Klemt

Yesterday, the Tales of the Cocktail Foundation announced the launch of their Policy Initiative, intended to update outdated labor standards and pay.

Along with advocating for both bartenders and servers, the initiative seeks to raise the subminimum wage to $2.13.

This news comes on the heels of the completion of an in-depth survey. The TOTCF surveyed more than 510 bartenders and other hospitality industry professionals about pay and other compensation.

In particular, more than half of bar workers want employers to provide health insurance. On the restaurant side, servers want to say increases in pay.

There’s much more, of course. Please visit this link to discover the finer details of the TOTCF Policy Initiative. Additionally, you’ll find TOTCF’s press release in its entirety below.

INTRODUCING THE TALES OF THE COCKTAIL FOUNDATION® POLICY INITIATIVE

TOTCF introduces a national initiative aimed at policy change in support of the hospitality community with first priority centered on improving labor standards for bar professionals

NEW ORLEANS, LA (February 13, 2024) — Tales of the Cocktail Foundation® (TOTCF) is pleased to announce the launch of the Tales of the Cocktail Foundation Policy Initiative, a multi-faceted effort designed to amplify and advocate for improved benefits and resources for hospitality professionals in the United States. The TOTCF Policy Initiative – which includes a robust nationwide survey and research project, coupled with support from the initiative’s advocacy committee members and partners – will catalyze an extensive campaign to create policy reform and positive change within the food and beverage community.

“Supporting an industry that has been historically underserved – from lack of industry research, common resources to educate and inform, and funding for coalitions – is crucial in breaking the cycles that have made it difficult to build a lifelong career in hospitality,” said Tales of the Cocktail Foundation CEO Eileen Wayner.

Intended to shift antiquated and subpar labor standards through industry support of positive policy action, the TOTCF Policy Initiative’s objectives include providing resources for employees and employers on labor standards and protections, conducting research and supporting efforts toward effective policy changes, information on healthcare access and benefits, sexual harassment training, and youth worker engagement – all with an emphasis on diversity and inclusion. The TOTCF Policy Initiative, along with its Bar Professional Policy Network Hub, will assist with the organization of grassroots development and advocacy efforts in industry professionals’ local communities, providing opportunities for advocates to be directly involved in policy and reform in their own communities.

“Given our unique position within the industry, we want to offer platforms and resources for productive conversations between policymakers, industry executives, bar owners and operators, and bar professionals, to ensure existing and future policy changes are reflective and inclusive,” said Tammera Catchings, Government Affairs Manager for Tales of the Cocktail Foundation. “For TOTCF, the process begins with supportive research data and intricate data analysis of bar industry professionals and their work.”

The Policy Initiative is centered around improving labor standards for hospitality professionals around the country and supporting increased protections that will help ensure bartending and serving are viable, long-term careers. One of the first priorities of the TOTCF Policy Initiative is to support efforts to increase the subminimum wage of $2.13 for bartenders and servers. Since 1990, employment in the hospitality industry has grown over 85%, while overall private-sector employment grew by only 24%. With more than one in ten U.S. workers employed in the hospitality industry, increasing the wage floor and improving labor standards would significantly improve the well-being of millions of Americans and their families and help reduce long-standing race and gender-based wage inequities.

Launched in spring 2022, Phase One of the Policy Initiative consisted of a robust research project, which culminated with an industry-specific data collection completed by more than 500 bartenders and servers nationwide, targeting topics such as job quality, compensation, tip culture, health benefits, and more. This research, which was analyzed by Dynata, the nation’s largest first-party data company, resulted in a compilation of data that highlights key trends in the hospitality community. By effectively utilizing the survey data to start a progressive dialog amongst hospitality executives, politicians, and advocates, the TOTCF Policy Initiative will encourage significant changes in the economic and labor standards for all bartenders and servers in the country. Research results will be published as analyzed on the Tales of the Cocktail Foundation Policy website in April 2024. In Phase Two of the initiative to support positive policy reform, TOTCF is partnering with Florida International University Chaplin School of Hospitality and Tourism Management to conduct further research and analysis into industry labor standards, culminating in research publication at the end of 2024.

TOTCF Policy Initiative Committee Members

TOTCF is pleased to share the collective of industry professionals who are dedicated to advancing and overseeing the Policy Initiative:

Zen Castro: New Orleans, LA – Espiritu Mezcaleria Restaurant, Bartender; BeachBum Berry’s Latitude 29, Bar Back
Jayanthi Daniel: Los Angeles, CA – Restaurant Workers Community Foundation, Executive Director
Lauren Darnell: New Orleans, LA – Made IN New Orleans, Executive Director
Amanda Gunderson: Los Angeles, CA – Another Round Another Rally, Co-Founder
Kaiden Hope: New York, NY – Beam Suntory, Multicultural Portfolio Associate
Alex Jump: Denver, CO – Focus on Health, Co-Founder and Director of Operations
Jesse Maguire: New York, NY – Beam Suntory, U.S. Trade Engagement Manager
Lynnette Marrero: New York, NY – American Bartender, Mixologist, and Philanthropist
Robin Nance: Albany, IN – Strategic Branding Expert
John Reyna: Dallas, TX – Texas Hospitality and Non-profit Law Center, Managing Attorney

Government Affairs Manager

Tammera Catchings, J.D., M.S.: Ridgeland, MS – Tales of the Cocktail Foundation

To learn more about the Tales of the Cocktail Foundation Policy Initiative and get involved, join the Bar Professional Policy Network. You can learn more about The Foundation via the Tales of the Cocktail Foundation website, Instagram, Twitter, and Facebook.

About Tales of the Cocktail Foundation

Tales of the Cocktail Foundation is a non-profit organization that educates, advances, and supports the global hospitality industry and creates lasting impact in our host communities. Tales of the Cocktail Foundation is the global leader in spirits education and a platform to tackle issues facing the industry. The pillars of the Foundation are to Educate, Advance, and Support the hospitality industry through programs that benefit individuals and organizations in the community and to make a lasting impact in communities that host our events. This year, TOTCF hosts its 22nd Tales of the Cocktail® (TOTC) conference in New Orleans from July 21-26, 2024, and celebrates the theme Inspire.

Image: Cory Fontenot

Closeup shot of the flag of the City of Chicago with Wrigley Building in background

October 16, 2023by David Klemt David Klemt No Comments

Chicago to Phase Out the Tip Credit

Chicago to Phase Out the Tip Credit

by David Klemt

In a move that some are celebrating and others claim will kill jobs, Chicago will phase out the tip credit incrementally by the year 2028.

Currently, pay for tipped workers amounts to 60 percent of the minimum wage. Starting next year, that will change.

Beginning July 1, 2024, tipped workers will earn eight-percent increases on an annual basis. This will continue until July 1, 2028. On that date, tipped workers must receive the full minimum wage.

Put another way, the city of Chicago will eliminate the tip credit entirely midway through 2028. To add clarification, this phasing out of the tax credit applies to all 77 of the city’s neighborhoods.

Overwhelmingly, Chicago’s City Council voted for the so-called “One Fair Wage Ordinance.” Thirty-six alderpeople voted “yea,” while just ten voted “nay.”

As one would expect, not everyone is happy that the ordinance was passed on Friday, October 6. Nor are they pleased that Mayor Brandon Johnson signed off on the bill a week ago today.

Specifically, Alderman Nicholas Sposato referred to the One Fair Wage Ordinance as a “job and business killer.”

Further, as reported by Restaurant Dive last week, the Illinois Restaurant Association opposes the decision to eliminate the tip credit in Chicago.

“We wholeheartedly disagree with the decision to move forward with the elimination of the tip credit,” Restaurant Dive reports a representative of the IRA saying in a statement emailed to the publication.

The National Restaurant Association also opposes the ordinance, reportedly vowing to fight any such legislation that introduced throughout the country.

However, One Fair Wage and the Service Employees International Union are celebrating the plan to phase out the tip credit. However, the SEIU would like the elimination to apply statewide.

A Compromise

Attempting to negotiate for legislation they found more palatable, the IRA had proposed a different approach.

Their version would have seen tipped workers make a minimum of $20.54 per hour. However, that ordinance would only have applied to restaurants that generate $3 million or more in annual revenue. Additionally, the IRA proposed tripling fines related to violations of the proposed ordinance.

Had that proposal been accepted, the pay situation would have been unchanged for tipped workers in smaller operations.

In the end, the IRA agreed to eliminating the tip credit over the course of five years to make the transition smoother for operators. This is due, in part, to the possibility of a two-year phasing out of the tip credit being passed by Chicago’s City Council.

The IRA, NRA, and others who oppose eliminating tip credits point to hardships on the operator side. Increased labor costs will lead to increases in menu prices, reductions in traffic and hours, the elimination of jobs, and, ultimately, the shuttering of many businesses.

However, those who support such ordinance point to the financial stability of vulnerable people, and those who work throughout the industry to earn a living wage.

The Future

While Chicago is the largest city in America to vote to eliminate the tip credit, it’s not the first pass such legislation.

The city joins Alaska, California, Minnesota, Montana, Nevada, and Oregon in doing so. Additionally, Washington, DC, will eliminate the tip credit fully by July 1, 2027. Phase one of DC’s tip credit elimination started May 1 of this year.

Of course, the news out of Chicago also comes on the heels of the FAST Act fight ending in California.

These developments beg the question: Which city or state will introduce legislation next, and how will it play out for workers and operators?

Image: Trace Hudson via Pexels

March 21, 2023by David Klemt David Klemt No Comments

IRS Proposes New Tip Reporting Program

IRS Proposes New Tip Reporting Program

by David Klemt

The Internal Revenue Service is proposing a voluntary tip reporting program which they’re calling the Service Industry Tip Compliance Agreement (SITCA).

Making the announcement via Notice 2023-13 back in February, the IRS is giving people the chance to comment on the SITCA proposal.

Per the IRS, their intention is to “take advantage of advancements” in POS, scheduling, and e-payment technology. How do they intend to leverage all this tech? In short, the IRS is proposing that POS systems will have to process payments and tips in the same way.

To clarify further, if someone pays by credit card, they’ll have to tip via credit card. If a guest pays in cash, they’ll have to tip in cash. So, should SITCA become the industry standard, the days of paying with a credit card but leaving a cash tip will be over.

However, in my eyes, this isn’t a simple “modernization” of IRS processes.

If the IRS is proposing a new for businesses to process tips, they’re looking to catch non-compliant businesses and tipped workers. A likely culprit or contributing factor to this IRS scrutiny? The retail venues now asking for or suggesting tips when customers check out.

So, it would be wise to reiterate to your team the need to report tips accurately. And remember, business owners need to ensure they’re complying with tip reporting as well. Getting flagged for inaccurate reporting is a great way to catch an audit, penalties, and a huge bill.

Nuts and Bolts

According to the IRS, SITCA will reduce taxpayer burdens. And, of course, the service claims the program will also reduce their own administrative costs.

Additional “features,” per the IRS website, are as follows:

The monitoring of employer compliance based on actual annual tip revenue and charge tip data from their point-of-sale system. There will be allowance for adjustments in tipping practices from year to year.
Participating employers demonstrate compliance with the program requirements by submitting an annual report after the close of the calendar year. This reduces the need for compliance reviews by the IRS.
Employers participating in SITCA will receive protection from liability under the rules that define tips as part of an employee’s pay for calendar years in which they remain compliant with program requirements.
Participating employers have flexibility to implement employee tip reporting policies best suited for their employees and business model. Policies must be in accordance with the section of the tax law that requires employees to report tips to their employers.

Requests for Comment

Interestingly, Notice 2023-13 contains a request for comments in four specific areas:

By what means a technology-based time and attendance system may be used by tipped employees to report tips. This includes tips in cash and other forms of tipping made through electronic payments methods (other than a credit card), regardless of whether the tips are received directly from customers or through tip sharing arrangements.
How tip sharing practices vary across service industries and how the SITCA program can support employer participation while accommodating potential differences in Federal, state, and local labor and employment law requirements.
By what methods employers of large food or beverage establishments participating in the SITCA program may meet their filing and reporting obligations under section 6053(c) and also satisfy the SITCA program requirements for compliance, while minimizing the administrative burdens on taxpayers and the IRS.

Those interested in providing such feedback have until May 7, 2023 to do so. The IRS has set up two ways to provide comments on Notice 2023-13:

Mail: CC:PA:LPD:PR (Notice 2023-13), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044; or
Electronic: Visit the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and Notice 2023-13) and follow the instructions for comment submission.

Personally, I have more questions than comments. Bear in mind, the IRS will stop accepting comments, feedback, and questions on May 7, 2023.

Image: Jon Tyson on Unsplash

January 17, 2023by David Klemt David Klemt No Comments

American Trends 2023: Technomic

American Trends 2023: Technomic

by David Klemt

Foodservice research firm Technomic has some interesting predictions for the hospitality industry in the United States of America this year.

On the topic of operations, Technomic foresees more negotiating power among workers. Additionally, the firm looks at both the economy and pent-up guest demand.

When it comes to food, the US and Canada have a trend prediction in common. And as the image atop this article signifies, a particular color may be a hit on menus in 2023.

Before we jump in, Technomic’s 2023 Canadian trend predictions are here. Last year’s Technomic predictions for America are here. Curious readers can review the firm’s 2023 predictions in their entirety here.

Okay, let’s go!

Think Pink

I want to address this prediction first. According to Technomic, pink is going to be the F&B color of 2023.

As they explain, the color is fun, nostalgic, and photogenic. Yes, operators must still consider the Instagram-worthiness of their menu items. That may change one day, but it’s not today.

Per Technomic, pink also signals that a food or drink may have antioxidants.

Some of the items the research firm names specifically: pink pineapple, pink salt, pink celery, cara cara oranges, and schisandra berries.

Pickle It

This is the culinary trend that, per Technomic, Canada and America will share in 2023.

Along with fermenting, pickling gives the kitchen and bar teams a unique experimentation method to explore. So, encourage these teams to get creative and add pickling and fermentation to your next menu update.

Of course, that’s not the only reason to consider putting pickling front and center. For many, these preparations indicate a healthy F&B choice. Think kombucha, as an example.

As we know, healthy choices continue to be top of mind for many guests.

One more note: Technomic suggests being transparent and identifying the pickling and fermenting processes your team leverages to produce each menu item.

Economics

For those looking for a bit of optimism in these trying times, Technomic may have what you’re looking for. This year’s report, What We Foresee for 2023, says the following about the possibility of a recession:

“There is reason for optimism in the coming year, however, as any recession is expected to be relatively mild.”

Yes, that’s just one source’s opinion. However, Technomic is known for their voraciousness when it comes to data. So, if this firm is optimistic it could be a solid sign that things are looking up in 2023.

“Pent-up consumer demand” and variations thereof have been making the rounds since 2o21. However, it’s still a relevant phrase.

As it pertains to 2023, Technomic believes on-premise dining may “bounce back” this year. In fact, the firm suggests that people want to socialize and dine in person now more than ever.

Also, delivery and pickup times appear to be growing. So, plenty of people will see in-person dining as the more appealing option in 2023.

Operations

In part due to legislation addressing minimum wage and workplace conditions, employees may have the upper hand this year.

Add the fact that many people seeking work know many operators are dealing with a labor shortage and their negotiating position looks even stronger.

So, we could finally be in for a significant change when it comes to how the industry looks at compensation. More and more workers—and the guests they serve—are taking issue with tipping. Instead, many people outside and inside of the industry want to see operators pay staff a competitive, living wage.

Of course, there are also the hospitality professionals who prefer tips to minimum wage. In 2023, the industry could experience the start of a sea change. Time will tell.

For more predictions and this Technomic report in its entirety, please click here.

Image: Alex Gruber on Unsplash

January 9, 2023by David Klemt David Klemt No Comments

Minimum Wage Rises for Most of USA

Minimum Wage Rises for Most of USA

by David Klemt

More than half of the states across America are either now seeing a boost to minimum wage or plan to increase the hourly minimum by the middle of this year.

In total, minimum wage is up in 27 states. However, the rise isn’t yet in place in a handful of states, including Nevada.

Now, the federal minimum wage still has yet to go up. That rate remains at $7.25 per hour, where it has been since 2009. For the curious, if a person works 40 hours per week and is compensated at the federal minimum rate, that’s just over $15,000 per year—before taxes.

Per Motley Fool: “If we factor in inflation, [federal minimum wage] would have had to grow to $10.20 to let people buy the same amount of goods and services today [as in 2009]. In real terms, the current minimum wage has shrunk by almost 30% since it was set.”

You’ll see below that I didn’t list the increases for tipped workers. As an operator, you should already be well aware of the minimum rate your tipped workers must be paid. In all likelihood, your suite of software is already updated to the current requirements (but check yourself to be certain).

The list will provide an idea of what you’re up against. It’s difficult to recruit rock stars if you’re unable to offer wages above minimum wage, never mind at minimum wage.

Today, for most workers, the minimum isn’t going to cut it. So, when you’re looking at what you can offer, keep in mind the minimum wage for both tipped and un-tipped workers in your area.

Also, know what other operators are paying. To remain competitive, consider what else you can offer, including your values and culture.

States Increasing Minimum Wage

Below, the states with an increase to the minimum wage. Rather than organize the list by hourly rate or rate of increase, I set it up alphabetically.

Alaska: $10.85 per hour
Arizona: $13.85 per hour
California: $15.50 per hour
Colorado: $13.65 per hour
Connecticut: $15 per hour (June 1)
Delaware: $11.75 per hour
Florida: $11 per hour (September 30)
Hawaii: $12 per hour
Illinois: $13 per hour
Maine: $13.80 per hour
Maryland: $13.25 per hour
Massachusetts: $15 per hour
Michigan: $10.10 per hour (could rise further; lawsuit pending)
Minnesota: $8.63 per hour (small employer); $10.59 per hour (large employer)
Missouri: $12 per hour
Montana: $9.95 per hour
Nebraska: $10.50 per hour
Nevada: $11.25 per hour (July 1)
New Jersey: $14.13 per hour
New Mexico: $12 per hour
New York: $14.20 per hour (excluding some areas); $15 per hour for fast food workers
Ohio: $10.10 per hour
Rhode Island: $13 per hour
South Dakota: $10.80 per hour
Vermont: $13.18 per hour
Virginia: $12 per hour
Washington: $15.74 per hour

Among the states on the list above, four are lifting minimum wage to at least $15. Those states are Connecticut, Massachusetts, California, and Washington. Additionally, the minimum wage is $15 per hour in parts of New York.

Interestingly, employers in Nevada can reduce the minimum wage by one dollar if they pay qualifying health insurance. In such a case, the hourly minimum will be $10.25.

Only one of these states, Montana, will remain under $10.

Cities, Counties, Districts

As stated above, some parts of New York have a minimum wage higher than $14.20.

There are also cities, counties, and districts boosting the minimum wage.

Denver, Colorado: $17.29 per hour
Long Island, New York: $15 per hour
New York City, New York: $15 per hour
Washington, DC: $16.50 per hour
Westchester County, New York: $15 per hour

Overall, more than half the country either already increased the minimum wage or will do so later this year.

Image: Adam Nir on Unsplash

Delivery worker on bicycle on city street

November 28, 2022by David Klemt David Klemt No Comments

$28.82 per Hour for NYC Delivery Workers?

$28.82 per Hour for NYC Delivery Workers?

by David Klemt

In response to the New York City Council’s proposal of $23.82 per hour for delivery workers, some “deliveristas” are asking for more.

Now, before we proceed, no, this isn’t a re-run of an article from last week. This isn’t a case of déjà vu—it’s the evolution of a news story that’s developing rapidly.

So, how much more do delivery workers in NYC want? Well, they’re after a significant bump over the council’s minimum hourly wage proposal.

Requesting that the NYC Council more accurately account for deliverista expenses, some delivery workers are asking for $28.82 per hour.

Early last week, a group consisting of Los Deliveristas Unidos and the Worker’s Justice Project members came together. They gathered at New York City Hall to make their stance on the NYC Council’s minimum wage proposal.

As the deliveristas see it, an increase from $23.82 to $28.82 more accurately reflects their operating expenses. The argument is compelling when one considers costs beyond fuel.

Asking for More

After all, not every delivery worker in NYC (and other markets) uses a car, truck or SUV to make deliveries. That should explain the use of the term “delivery worker,” not “delivery driver.” Some deliveristas ride motorcycles, mopeds, or bicycles. I’m willing to bet some even use scooters, rollerblades, or skateboards.

Using any mode of transportation as a delivery worker comes with requirements, both legal and practical. For example, deliveristas must maintain insurance, maintain their transportation, and purchase and maintain safety equipment.

And yes, that safety equipment is crucial. According to some reports, around a third of NYC those who deliver on two wheels have been injured on the job. Tragically, 33 delivery workers have been killed since 2020. In fact, NYC says delivery workers have the highest injury rate.

Another interesting development may seem semantic. However, when one takes time to truly consider the point it’s rather poignant.

In asking for the proposal of $23.82 to rise by $5 by 2025, are asking for a living wage. Not minimum wage, as the proposal frames the hike, but a living wage.

One worker, Antonio Solís, as quoted by The City, a non-profit NYC news publication, explained: “We are asking the city to make a $5 adjustment, to go that extra mile to ensure we get to a living wage.”

A Request, not a Rejection

It’s also important to note that NYC’s delivery workers aren’t rejecting the council’s minimum wage proposal. Rather, the request is that the council considers updating their proposal ahead of a December 16 public hearing on the matter.

So far, companies like DoorDash, Grubhub, and Uber Eats haven’t released much in the way of statements. However, there have been reports quoting a handful of representatives. In pushing back against the proposal, they’ve mentioned increased costs; reduced deliveries; and the possibility of “locking out” deliveristas if delivery demand is low at a given time.

Should legislation go into effect after the public hearing, it’s likely we’ll see lawsuits from the delivery companies.

Image: Patrick Connor Klopf on Unsplash

November 22, 2022by David Klemt David Klemt No Comments

$23.82 Minimum Wage for Delivery Workers?

$23.82 Minimum Wage for Delivery Workers in NYC?

by David Klemt

With a public hearing on the docket for December 16, the New York City Council is proposing “fairer pay for delivery workers.”

The move is a year in the making. Last year, the NYC Council approved legislation with the goal of improving delivery worker pay and working conditions.

Now, the council is moving to increase minimum wage for the 60,000-plus delivery workers in the city.

At the risk of coming across as pessimistic, the legislation is likely to be unpopular with third-party delivery services. After all, when NYC and San Francisco passed laws to cap third-party delivery commissions, the big services filed lawsuits.

So, again, increasing the minimum wage for delivery workers in NYC will probably not go down well with companies like Uber, DoorDash, and Grubhub.

It’s possible we’ll find out before the end of this year. After the public hearing, the NYC Council will consider public comments. Then, the council could move forward and enact the legislation.

What’s in the Proposal?

Should the rule go into effect after the public hearing on December 16, minimum wage would rise to $17.87 per hour for third-party delivery workers. By April 1, 2025, that rate would increase to $23.82.

“This new proposed minimum pay rate would help ensure a fairer pay for delivery workers for third-party apps, providing more stability for 60,000 workers across our city,” says New York City Mayor Eric Adams.

According to reports, Brooklyn Borough President Antonio Reynoso is in favor of the legislation as well.

“It’s absolutely unacceptable that the restaurant delivery workers who provide for so many in this city are not justly compensated for their time, reimbursed for their expenses or provided essential benefits,” says Reynoso.

So, how did the council arrive at the $23.82 per hour figure? Well, we actually have that information:

$19.86, which matches standards set by the New York City Taxi and Limousine Commission for ride-hail drivers;
$2.26 for expenses delivery workers incur; and
$1.70 for worker’s compensation.

Why Legislate Delivery Worker Pay?

It appears the main reason is an incredibly simple one. In short, third-party delivery workers aren’t making minimum wage in NYC.

Per the Department of Consumer and Worker Protection (DCWP), delivery workers average less than the city’s $15 minimum wage. With tips, they’re averaging $14.18. And without tips? As one can imagine, the hourly rate plummets: $7.09 per hour.

According to the DCWP, the average hourly expense a delivery worker incurs is $3.06. So, that drives their hourly pay to $11.12 with tips, $4.03 without.

In an argument likely to be cited in any lawsuit filed by DoorDash (or at least shared in a public statement), the company claims its delivery workers make almost $29 per hour.

Clearly, there’s a discrepancy somewhere. Either delivery drivers are woefully underpaid for the service they provide or multiple researchers are misinterpreting hourly pay data.

Several sources have cited a statement made by a DoorDash representative about the NYC Council’s proposal:

“Dashing allows so many across New York City to earn when, where and how often they choose,” says the rep. “Unfortunately, the proposed rule does not appropriately account for this flexibility or that Dashers are able to choose which deliveries they accept or reject.”

Their statement continues, addressing a possible rise in costs and drop in orders:

“Failing to address this could significantly increase the costs of delivery, reducing orders for local businesses and harming the very delivery workers it intends to support.”

Why Should I Care if I Don’t Operate in New York City?

We’ll see—quickly, apparently—if this proposal becomes law. Should that happen, there’s reason to assume similar proposals will pop up in other cities and states.

We’ll also see whether or not third-party delivery companies file lawsuits in response. They’ve done so for commission caps, after all.

At any rate, this is one to watch. Similar legislation could be coming to your market.

Image: Nik Shuliahin 💛💙 on Unsplash

November 7, 2022by David Klemt David Klemt No Comments

Tipping is on the Ballot in Washington, DC

Tipping is on the Ballot in Washington, DC

by David Klemt

Out of concern that people who work for tips aren’t making minimum wage in Washington, DC, Initiative 82 is on the ballot.

This is interesting for several reasons. One of which is the fact this isn’t the first time this issue has been voted on in DC.

Back in 2018, Initiative 77 was presented to Washington, DC, voters. The initiative took the $3.33 per hour minimum wage for tipped workers up to $15 per hour, the full minimum wage.

In June 2018, the measure was approved by voters. However, the Washington, DC, Council held a vote and repealed Initiative 77 after if had been passed.

Phil Mendelson (D-Chairman) of the Washington, DC, Council, introduced the bill that ultimately repealed Initiative 77 in October 2018.

“The Council amends laws all the time. And if a law is a bad law it should be amended or repealed,” said Mendelson at the time. “It doesn’t matter if the law was adopted by Congress, the voters, or ourselves.”

Further, Mendelson claimed that tipped workers themselves—bartenders, servers, valets, manicurists, and more—didn’t hold a favorable view of the passing of the initiative.

“77 may be well-intentioned, but the very people the Initiative is intended to help are overwhelmingly opposed. If we want to help workers – protect them from harassment and exploitation – there are better ways than Initiative 77,” Mendelson said.

One council member, Mary Cheh (D-Ward 3), opposed repealing Initiative 77 and addressed claims that it was harmful to tipped workers.

“Although I take these claims seriously, in my view they are speculative and not borne out by the experience of the other jurisdictions that have one wage,” said Cheh.

Support

Whenever increasing tipped worker wages to full minimum wage comes up, we tend to encounter the same arguments for and against.

Currently, the tipped hourly wage in DC is $5.35 per hour. In comparison, full minimum wage in DC is $16.10 per hour.

Now, as the law reads, if a tipped worker’s wages don’t equate to full minimum wage, their employer is expected to bridge the gap.

The key argument for the passing of Initiative 82 is simple: tipped workers should make at least minimum wage. These workers deserve the stability of knowing how much they’ll make each shift and earning a living wage (consistently, hopefully).

Those who support Initiative 82 also say that since the measure doesn’t outlaw tipping, tipped workers would earn more than minimum wage.

Opposition

Opponents, however, argue that the initiative will harm tipped workers. Some say that operators will cut shifts and increase prices in response to Initiative 82 passing. This will, of course, lead to servers, bartenders, and other tipped workers making much less than they did in the past.

Traffic may also decrease because it’s assumed that operators will increase costs significantly.

There’s also the argument that’s often (if not always) made when this topic comes up: Tipped workers themselves don’t support these initiatives.

“I have not met a single server who wants this,” Washington, DC, bar owner David Perruzza told the Washington Blade. Perruzza added, “The people who support this don’t know anything about the service industry.”

A Few Questions…

I’ve made no secret of my cynicism when it comes to politicians and their relationships with our industry.

My main argument was made for me: the Restaurant Revitalization Fund saga. We watched for months as Congress failed to replenish the RRF, leaving more than 177,000 operators and their staffs to fend for themselves. This, after months of dangling replenishment in front of all of us. Ultimately, they abandoned us.

Tellingly, Senator Rand Paul (R-KY) referred to RRF replenishment as a “bailout.” And apparently he doesn’t think much of the challenges operators have faced since the start of the pandemic, asking, “Where’s the emergency?” The closures of tens of thousands of restaurants and bars, often the cornerstones of communities across the country, doesn’t rank as an emergency, apparently.

So, Initiative 77, Initiative 82, and similar measures beg a few questions:

Do politicians actually ask their tipped-wage constituents their thoughts on this topic before introducing these ballot measures?
When these initiatives are being considered, do people just ask a few operator friends their opinions?
Do local, state, and federal politicians really have a grasp of our industry?

One thing is certain: Industry eyes across the country are on Initiative 82. If it passes, we can likely expect similar measures to be introduced in cities and states. Should it fail, it may be a while before another jurisdiction sees this type of initiative again.

Image: Annie Spratt on Unsplash