L.A. restaurants seize opportunity to push for a tip credit

The battle over boosting the minimum wage in Los Angeles has turned to the dollar bills tucked under an empty coffee cup, the spare change dropped into tip jars and the hasty calculations jotted down on meal tabs.

As L.A. leaders weigh raising wages for businesses across the city, scores of local restaurateurs argue that the city should count tips toward the added amount they would have to pay workers to reach the proposed $13.25 or $15.25 minimum wage.

Doing so, they say, would ensure the wage increase helps those who need it most and reduce the financial burden on businesses.

"There is just no room for us to be able to afford this increase and stay in business," said Caroline Styne, who owns several restaurants and cafes around Los Angeles. "None of us is refuting the fact that people making $9 an hour cannot get by on that. I'm talking about people that are already making well over that."

Restaurant servers may get $9 or $10 an hour in wages but as much as $30 or more hourly when tips are included, restaurant owners have argued at public hearings, citing industry research. They maintain that including tips in calculations of minimum pay would not harm workers. If tips were unusually low one day, they say, the restaurant would have to make up any difference to ensure employees receive the required minimum.

"We're willing to pay people to get them to minimum wage," restaurant owner David Dickerson told lawmakers. "We're just asking that tips be part of the equation."

Labor activists warn that counting tips toward the citywide minimum wage would violate California law and leave those waiting tables, scrubbing cars or turning down hotel beds more vulnerable to being illegally underpaid. Most tipped workers have low incomes, they say, both inside and outside the restaurant world.

Restaurant owners "cherry-pick examples of servers in very high-end restaurants" who get big tips, said Rusty Hicks, head of Los Angeles County Federation of Labor. But the Raise the Wage Campaign estimates that 62% of L.A. workers in tipped occupations earn less than $25,000 annually, including waiters, bartenders, barbers, taxi drivers and hairstylists working both full and part time.

"It's not fair for us to be kept down while everything around us increases in price," South Los Angeles resident Troy Taylor told city lawmakers at a recent hearing. Taylor said she earned only $900 in March — including tips — while working part time as a server and cashier at concession stands for sports and concert venues. She said her wages typically hover around $12 an hour.

At the Ice Cream Lab in Little Tokyo, 22-year-old Erick Plazo said he averages a few dollars in tips hourly for serving up cups of salted pretzel-and-caramel or Thai tea-flavored ice cream prepared with liquid nitrogen. He also works a second job at a coffee shop to pay rent and buy textbooks for his classes at Cal State Northridge.

If his employers could count his tips as part of his pay, Plazo said, "it feels like it kind of defeats the purpose of a tip."

The question of how to handle tips has posed a dilemma for Los Angeles lawmakers, who say their intent is to pull Angelenos out of poverty. Beacon Economics, hired to analyze the wage boost for the Los Angeles Area Chamber of Commerce, estimated that nearly a fifth of Los Angeles County workers earning less than $13.25 an hour do jobs that usually involve tips.

When I waited tables, back in the 90s, I averaged about $20/hour. This sounds like a lot, until you factor in that most server/counter positions are part-time. That $20/hour added up to about $1600/month. $18,000/year was hard to get by on back then. It can't be any easier now. 

California law prohibits employers from counting tips against the wages that workers are owed. The California Supreme Court has previously interpreted those state rules to prohibit setting a lower, alternative minimum wage for tipped workers. But as Los Angeles considers upping hourly pay to at least $13.25 citywide within a few years, some restaurant owners are pressing city leaders to find a way to count tips for their industry — one that economists see as especially sensitive to wage increases.

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