Restaurant Owners Want Tipped Employee Proposal in Jobs Bill

Minnesota restaurateurs aren’t giving up.

As part of a final push to get the tipped employee tier to the minimum wage included in the omnibus jobs and energy bill to be passed in an upcoming special session, restaurant operators and the Minnesota Restaurant Association appealed to legislators during a press conference June 3, citing potential harm to their businesses if the hourly wage goes up without recognizing tips.

"We want to be able to stay affordable," said Peg Rasmussen, owner of Peg’s Countryside Café in Medina, a 55-seat restaurant whose main clientele is families with children. "My concern is they’re going to eat out less" if the café is forced to raise menu prices to offset the cost of paying a higher minimum wage.

The MRA’s proposal would keep the minimum hourly wage at $8 an hour for employees earning $12 an hour or more each workweek with wages and tips combined. The wage would be indexed for inflation in 2017.

The bill was sponsored by Republican Rep. Pat Garofalo of Farmington and passed in the House with a bipartisan vote of 78-55 but was never voted on in the Senate. Organized labor and advocates for a higher minimum wage put pressure on Senate leadership to oppose the provision, said MRA Executive Vice President Dan McElroy, with the misconception that it was "picking away" at the minimum wage increase package approved last year.

"We want to finish the fix," said McElroy of the proposal he noted is unique to Minnesota, one of only seven states that doesn’t use the federal tip credit.

"No one would make less than they do today."

Last August the minimum hourly wage rose to $8. Under current law it will rise to $9 this August, then to $9.50 by 2016. The next move in 2018 indexes yearly wage increases with inflation. 

Rasmussen said she eliminated a couple of positions at her restaurant last year, realigned her staff and slightly raised prices following the minimum wage increase. She noted her servers already make between $20 and $30 an hour with tips and her other hourly employees are paid more than the minimum wage. Without recognizing tips as income, further wage bumps will benefit those who are already the highest paid employees, she said.

That disparity between front and back-of-the-house employees is growing larger, said Ed Fong, owner of Bloomington Chinese restaurant David Fong’s. He sees the tipped employee tier as way to bring equity and fairness to restaurant operations and help owners manage costs. Fong said owners are also faced with rising food and healthcare prices, and are left with little choice but to pass those costs on to customers.

Gov. Mark Dayton is expected to call back the Legislature for a special session in the coming days to deal with outstanding budget issues. Dayton previously vetoed the K-12 education bill and the omnibus agriculture, environment and natural resources bill, in addition to the omnibus jobs and energy bill.

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