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The $15 question

Karlyn Dozier is a 34-year-old single mom from New Orleans. For the past 10 years, she's worked in restaurants, mostly as a server and bartender. She quit her last job, she says, after a new tip-sharing policy cut her take-home pay. "It wasn't worth it," she says. "I wasn't making enough to support me or my son. I was forced to live with my family."

Sean Falk is an ex-Marine from Monroe, Mich., with seven franchised stores, including Great American Cookies and Pretzelmaker. His workers start at the federal minimum wage of $7.25 an hour. But those who stick around soon are making $9 or more as shift leaders.

"As they take more responsibility, they get more pay," says Falk. "If they show me they want to work, I don't want to lose them."

Things would be different, though, if he had to pay everyone $10 an hour to start. Labor costs would jump 26 percent, he says, forcing him to raise prices or close his weaker stores. "I sell cookies and pretzels," says Falk. "There's an upward ceiling to how much someone will pay for those."

Whose story will tug at America's heartstrings more? The answer could sway a new campaign over an old food-service issue: the minimum wage. Since November 2012, when workers from several New York City quickservice restaurants walked off the job for one day, the issue has erupted into headlines. Escalating protests in more than 100 cities since have created an image of a fast-food worker uprising—demanding $15 an hour.

Behind that storm, warn restaurant observers, a bigger one is brewing: a new labor movement, with its sights set on restaurants.

A union by any other name

"There's a very well-funded, highly organized campaign against the industry," says Rick Van Warner, president of public affairs consultants The Parquet Group in Orlando, Fla. "It's carefully, nationally orchestrated, with the full intention of trying to make it look local. Behind the curtain are the unions, financing and paying all these groups."

With reputations for low wages and high turnover, most restaurants have long been ignored by unions. Of 8.3 million U.S. food-service workers, only 1.8 percent belong to unions, reports the Bureau of Labor Statistics—lower than all other industries except agriculture and finance. Until now.

With private-sector membership down to 6.7 percent, labor is looking where the jobs are. "All the job growth has been in the service sector, and there's no other place to go," says Scott DeFife, executive vice president of policy and governmental affairs for the National Restaurant Association. "This is an unprecedented campaign, in terms of anything we have ever seen before."

Part of what's new is the groups themselves: nonprofit entities known as worker centers. And they borrow from union tactics, such as picket lines, while keeping an arm's length from both traditional unions and the labor regulations that govern them.

Their origins lie in immigrant communities, says labor professor Janice Fine of Rutgers University in New Brunswick, N.J. Many worker centers arose in the 1990s to help low-wage workers in construction, day labor and farm work, with everything from learning English to settling wage disputes. A pioneering group, the Chinese Staff and Workers Association, won backpay for workers at two restaurants in New York City's Chinatown.

"Most worker centers were filling the void left by the labor movement not organizing low-wage workers," says Fine. "They're a little bit of legal aid, a little bit of labor market intermediary and a little bit of community clubhouse." Of 215 centers she surveyed recently, only 14 percent have any union affiliations. More often, their allies are community, church, student and legal-aid groups.

Lately, worker centers also have found a network of givers such as the Ford and Rockefeller Foundations. The U.S. Chamber of Commerce tallies at least $57 million that 21 foundations bestowed on worker centers and related groups from 2009 to 2012.

A spokeswoman for the Public Welfare Foundation, which gave $5.5 million, says, "The foundation supports groups that seek policy and system reforms to improve the lives of low-wage working people."

Glenn Spencer, vice president of the Chamber's Workforce Freedom Initiative, puts it this way: "Worker centers attempt to portray themselves as made up exclusively of low-wage employees on shoestring budgets. Really, there's a very sophisticated, well-funded network behind it all."

Pressure in numbers

One of the largest beneficiaries of the foundations is the Restaurant Opportunities Center and its chapters, to the tune of $6.2 million over four years. It was launched in 2002 by the Hotel Employees and Restaurant Employees Union to aid workers left jobless by the attacks on the World Trade Center. Under the direction of immigrant waiter Fekkak Mamdouh and immigration attorney Saru Jayaraman, it has grown to 13,000 workers spanning 11 cities. ROC's programs include job training, surveys of working conditions and a dining guide, which rates restaurants based on pay scales, paid sick days and advancement opportunities.

But the group is best known for its bare-knuckles organizing style. Instead of seeking union elections, it refers disgruntled employees to labor lawyers—who know the intricacies of wage laws better than restaurant owners. A delegation delivers a list of demands, for back pay or better working conditions, frequently followed by a lawsuit.

If an owner doesn't settle, he may face a parade of demonstrations. In New York City in recent years, Daniel Boulud's diners had to make their way past a 12-foot inflatable cockroach. Mario Batali won a temporary restraining order after claiming a wedding party had been hassled, while Shelly Fireman of the Redeye Grill and Shelly's called a ROC campaign "a sad shakedown attempt." All three chefs eventually settled, while denying all charges. Batali also expanded vacation and sick days, and promised cultural sensitivity training for management.

Jayaraman says, "We need public pressure, not just litigation and conversation, to move a company." She adds, "When high-profile employers do the right thing, it has reverberations through the whole industry."

The latest target has an even higher profile: 2,100-unit Darden Restaurants. In 2012, ROC hit the casual-dining giant with the first of three lawsuits, alleging discrimination and wage theft at its upscale chain The Capital Grille. Darden spokesman Rich Jeffers calls the cases baseless, noting 34 percent of its managers are minorities and 49 percent are women. The company has been praised for diversity in magazines such as Black Enterprise and Hispanic Business.

"It's no coincidence they're coming after the largest full-service restaurant operator in the country," says Jeffers. "ROC's campaign is nothing more than a well-orchestrated campaign of harassment against our company."

What maddens ROC's critics, besides its success, is that it's not registered under federal law as a labor organization. Such a designation could cramp its ability to picket and boycott businesses, as well as receive grants from tax-exempt foundations.

"They clearly know they're walking on the right or wrong side of the line," says Michael Paranzino, spokesman for the debunking website ROC Exposed. "They know they're pushing the envelope."

So far, ROC has survived challenges before the National Labor Relations Board and the Internal Revenue Service. ROC doesn't seek collective bargaining agreements, argues Jayaraman, and none of its targets have gone on to be unionized. "The law was meant to apply to traditional unions, which we're not," she says. "They're trying to kill the messenger. I take it as a compliment."

Union jacked

The ultimate compliment, perhaps, comes from the 2.1 million-member Service Employees International Union. It has borrowed from ROC's playbook to help launch the new wave of fast-food strikes, executed partly by a network of affiliated nonunion groups.

Publicly, SEIU describes the strikers as independent coalitions of workers and community groups—a lot like worker centers. In St. Louis, the Show Me 15 campaign includes over 100 union, church, poverty and peaceorganizations. According to community director Martin Rafanan, an Evangelical Lutheran minister, the coalition is made up of 400 to 600 restaurant workers and 7,500 other activists. Community allies, he explains, are needed to help striking workers get their hours or jobs back. "To have two or three ministers showing up at a restaurant really wakes up the management there," he says.

But union records show a less-public side to the story. Show Me 15 (its name referencing the demand for a $15 wage) meets in SEIU offices, and its parent, the St. Louis Organizing Committee, lists two SEIU staffers as president and secretary.

Copycat coalitions have popped up in Chicago and New York City, where SEIU employees work with offshoots of the defunct community group ACORN. Both campaigns—Fight for 15 and Fast Food Forward—make the same two demands: a $15 living wage, coupled with the right to form unions. SEIU did not respond to interview requests for this article.

How serious is the union about such demands? In the short run, says Fine, labor leaders probably aren't sure.

"They needed more of a climate change," she says. "They're emboldening workforces to ask for more, as well as raising public awareness. It's not clear whether all of this will ultimately be through unionization."

One goal of the strikes is to draw attention to local minimum wage campaigns. In November, voters in SeaTac, Wash. passed a union-backed ballot initiative for $15. It affects only 1,600 workers, but it's sparked a similar campaign in Seattle. More modest increases are being proposed in 34 states, according to a count by the Associated Press. "They'll put it on the ballot on purpose to drive turnout," says DeFife, "to create pockets where they can say, ‘It can happen here.'"

Long term, though, SEIU may have bigger ambitions. An internal memo from 2009 proposed targeting seven to 10 of the largest restaurant chains in one city, with help from non-labor groups. It read, "Use a living wage as a vehicle to excite, build momentum, build worker lists, ID potential leaders and potentially support collective bargaining."

Says Rafanan, "These strikes are a first step. We will have to find other points of compression on these corporations and make them come to the table. Workers understand they're not going to get $15 an hour without a union."

Getting the story straight

So far, restaurants' official reactions to the protests have been muted. McDonald's released a brief statement that welcomed striking employees back to work. It added, "To right-size the headlines, however, the events taking place are not strikes. Outside groups are traveling to McDonald's and other outlets to stage rallies."

In Congress, efforts are afoot to rein in worker centers. In August, the House Committee on Education and the Workforce asked the Labor Department to re-examine whether ROC and Fast Food Forward, among others, should be regulated as labor organizations.

Bolder criticisms come from groups that operate partly undercover to expose work center workings. ROC Exposed and Worker Center Watch, for example, dig up documents and call attention through websites and op-eds, but neither discloses its own funders, citing fears of harassment.

It's time for the industry to get more aggressive in explaining to the public that entry-level jobs are really opportunity jobs, says The Parquet Group's Van Warner. To counter labor-group spending, he recommends restaurants make common cause with other service industries such as hotels and convenience stores. "[Labor groups] are putting forward the stories that will tug on people's heartstrings," he says.

This year, says NRA's DeFife, "We'll be working a lot harder to tell our story to policymakers." The NRA is targeting state and local minimum wage bills, encouraging restaurant leaders to publish letters and op-eds explaining the industry's side. The association also is preparing a new study on upward mobility in restaurants. "Nine out of 10 salaried workers in the industry started off as entry-level workers," says DeFife. "It's one of the industries with the greatest amount of opportunity for people who have not necessarily gone to college."

For their part, labor groups also are stepping up their efforts. "It appears the labor unions are gearing up for a very long term effort to unionize service industries," says Van Warner. "It's not so much about trying to unionize the restaurant industry today as to try to disrupt the business model to the point where the wage structure will be high enough to support union dues."

Right now, he warns, "It's escalating, and it's going to get worse before it gets better."

What if ... ?

What if the federal minimum wage jumped to $10.10, as President Obama has proposed? Economists argue about whether it would lead to fewer jobs overall. But the restaurant industry offers its own evidence:

  • After a 2007 raise in the federal minimum wage, the National Restaurant Association found that 41 percent of owners cut back employee hours.
  • In a 2013 poll by the International Franchise Association, 68 percent of franchisees said they would reduce jobs or hours if the wage increased to $9.
  • In Washington, where the minimum wage is $9.32, a typical restaurant has three fewer employees than the national average, according to the state restaurant association.

"You have to figure out how to get by with less labor," says Kevin Burke, managing director of investment banker Trinity Capital. "You can employ eight guys at $10 an hour or 10 guys at $8 an hour."

Yet, operators may see one possible benefit of a higher wage: lower employee turnover. Economist Arindrajit Dube of the University of Massachusetts Amherst found that a 10 percent boost in the minimum wage reduced restaurant turnover 2.6 percent.

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