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Trendsetting city regulates service charges

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A minimum wage bill passed in Berkeley, Calif., last week as an alternative to competing ballot initiatives would set new rules for restaurants that opt for service charges as an alternative to tipping.

The service charge stipulation essentially calls for keeping a record of funds that are collected as service charges and letting the staff know how much each employee receives from the pool. The information would be released no later than the end of the relevant pay period.

Failure to collect and disclose the information would result in a $500 fine.

The provision is included in a measure that lawmakers passed to avert confusion among voters about competing wage provisions slated for November’s ballot. Both referenda would raise the city’s minimum wage to $15 an hour. However, the version supported by organized labor would hike the minimum to that threshold by Oct. 1, 2017. A second referendum would set the date of the increase at Oct. 1, 2019.

The measure passed by the City Council would set an enactment date of Oct. 1, 2018.

The compromise bill has won the support of labor and business. Both of those groups have indicated they will oppose the referenda. The proposals will remain on the ballot because of state regulations.

All three of the measures call for paid sick leave.

The inclusion of new regulations for service charges comes as many full-service restaurants are exploring ways of closing the gap between back-of-the-house and front-of-the-house pay. Because servers earn most of their compensation from tips, their take-home pay far eclipses what kitchen employees pocket through straight wage payments.

As a result, many restaurants are struggling to staff their kitchens. Prospective hires would rather wait tables because of the higher compensation.

Some restaurateurs have experimented with service charges, or assessing a fee in lieu of tips and distributing the dollars more equitably among the staff. But complex regulations and the outright ban of the practice in some areas have complicated those efforts.

In response, some operators have tried an alternative that is technically profit-sharing—collecting a share of sales and redistributing it as compensation to the staff in accordance with complex schedules.

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