How Chicago restaurants got burned by their own advocate

Working Lunch: The Illinois Restaurant Association surrendered to defeat without so much as making a fist.

A guest on this week’s Working Lunch political-affairs podcast did not hold back in gauging the setback full-service restaurants suffered this week in one of the nation’s outstanding dining-out markets.

“What happened in Chicago is a disaster that the industry will be dealing with for months if not years to come,” Michael Saltsman, co-owner and partner in the fearsome lobbying firm Berman & Co., told podcast co-hosts Joe Kefauver and Franklin Coley. “I’ll be blunt: The key problem was a lack of leadership.”

Saltsman was referring to a compromise the industry struck with one of its major adversaries on a proposal to phase out the tip credit, the break 43 states give the employers of workers who are routinely tipped. Those employers don’t have to directly pay a full wage to the employees if gratuities raise their income to the minimum hourly pay rate mandated by law.

Chicago’s new mayor, Brandon Johnson, campaigned on a pledge to kill that tip credit, and he’s been pushing hard to deliver on that promise. He’s been supported in that quest by One Fair Wage, a union-backed group aiming to disallow the credit so that restaurant servers and bartenders would get a full minimum wage from their employers plus whatever gratuities customers might leave for them.

The local restaurant industry had mustered its resources for a fierce fight over the credit. But then an astonishing thing happened: The Illinois Restaurant Association agreed to drop its resistance to a bill ending the tip credit if proponents agreed to phase out the demise over five years instead of two.

With the about-face by the association, a credit-killing bill sailed through a Chicago legislative committee on Wednesday. Few dispute that it’s certain to pass when the full City Council meets on Oct. 4.

“The bottom line is, instead of having that fight, the state association decided to cut a deal, really capitulated, to give One fair Wage a big victory there,” said Saltsman.

Once the association agreed to the deal, he recounted, One Fair Wage immediately issued a statement headlined, “Illinois Restaurant Association endorses ending the subminimum wage.” Being able to say as much is going to give One Fair Wage a powerful weapon in its crusade to kill the tip credit anywhere it can, Saltsman said.

Indeed, the union-funded group has already revealed where it plans to bring its fight next, starting with the Illinois statehouse.

One Fair Wage went as far as praising and thanking the IRA’s CEO, Sam Toia, for dropping his resistance.

The National Restaurant Association has stressed that it remains opposed to disallowing the tip credit in all of those jurisdictions as well as on the federal level, just as it continued to push against the Chicago measure right up until Wednesday’s vote.

“The truth is the industry is still opposed to killing the tip credit,” said Coley. “What’s coming out of Chicago is this impression that the industry is OK with disallowing the tip credit.”

“Now we have two arms tied behind our back,” said Kefauver.

Toia has publicly defended his action as an attempt to get the industry a key concession—an 8% increase in servers’ wages in each of the next five years, instead of a much larger jump in just two—when it was clearly going to lose the battle.

“We probably would have lost in some way shape or form,” commented Coley, who runs the government-affairs shop Align Public Affairs in Orlando, Fla., with Kefauver, a former head of government affairs for Darden Restaurants. “What makes me want to throw my computer against the wall is how we lost.”

Indeed, you don’t strike a deal before the fight’s even begun, said Saltsman. “You strike a deal after you have fought. You strike a deal at the end of the fight because otherwise the perception is that the restaurant industry thinks this is a good idea.

“It gives me no pleasure to publicly criticize the head of a state restaurant association,” he said. “But when you have a situation where one decides to go rogue on something like this, we have an obligation to call it out.”

During the ramp-up to Wednesday’s vote, the IRA did not respond to a request from Restaurant Business for an interview with its government-affairs specialists or Toia.

This week's episode of Working Lunch also includes a behind-the-scenes recount of how the industry struck a deal in California to avert the establishment of a committee with broad authority and leeway to set wages and working conditions for most fast-food restaurants within the state. That account comes from one of the participants in the negotiations leading up to the controversial agreement, NRA EVP of Public Affairs Sean Kennedy.

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