A receipt from The Radler clearly indicates the included tip. In fact, there is no line for an additional tip—only the customer’s signature/Photo: Kristine Sherred
By Kristine Sherred
My first serving job was at a small French bistro that accommodated sixty guests in a narrow space with an open kitchen and no waiting room. In winter, we even tied up the back-porch patio with heavy plastic, gassed up the heat lamps and sat families and couples out there. (It was cozy, I swear.) The service staff consisted of four servers at peak hours; we had no food runner, assistants or expediters. We had just four servers and one manager/hostess.
Due to the nature of the restaurant’s floor plan, the servers shared tips. Each wait-staff member, regardless of section served or strength of salesmanship, earned the same amount of money per hour. This often-frowned-upon tactic created a sense of camaraderie rarely seen, though often touted, at restaurants.
With neither a bar nor support staff, tips beelined straight to the servers. The layout and size of this small restaurant almost demanded equal tip share: teamwork was essential. Three servers open, three servers close and three servers go home with the same amount of money.
Such kindness is not necessarily common at restaurants. Servers often complain about their section, about customers, about their last tip. They’re never content. At $2.13 per hour nationally (now $5.95 in Chicago, up from $4.95 before the minimum wage bill passed the state legislature in 2015), why would they be?
On legal paper, the employer receives a “tip credit” to pay this lower wage to employees who perform tipped work, which by law requires that the employee’s primary responsibility be direct customer interaction. Regardless of their level of service, they’re not compensated with a living wage unless you, the customer, pay them what their employer either cannot afford or refuses to pay. The tip credit is a legal way for employers to pay employees less in the expectation that customers will tip employees enough to ensure a living wage.
According to the Bureau of Labor Statistics, the median annual national wage for a server is $9.25 an hour, with an annual salary of just over $19,000. Even if you look at BLS records for the mean annual wage, it’s just $11.07 an hour, or around $23,000 a year.
When New York’s restaurant king Danny Meyer announced last fall that his group would eradicate tipping and switch to a “hospitality included” model, the American restaurant industry sat up a little straighter. We are, after all, one of the few countries that rely on customer gratuity to pay our restaurant and bar professionals. One year later, similar stories have popped up in newspapers across the country, albeit from quieter sources than Union Square Hospitality Group.
Et Tu, Batali Lawsuits related to tipping and wage inequality abound against the likes of Mario Batali’s multi-million dollar restaurant group, the late Charlie Trotter’s eponymous restaurant and Thomas Keller’s lauded Per Se.
In 2014, employees at a slew of Batali’s twenty-six establishments in New York and elsewhere settled a lawsuit, initiated by one server and a food runner, alleging misappropriation of tips to pay manager salaries. More than a thousand employees who worked in those establishments across the span of almost a decade received a share of the $5.25 million settlement. Despite articles in online publications such as Eater and The Huffington Post, coverage largely ignored the deeper issue of tip mismanagement that plagues our hospitality payment model.
About a decade before Charlie Trotter’s closed in 2012 and its founder tragically died the next year, Beverly Kim (now running Parachute, a Food & Wine Best New Restaurant) filed a lawsuit alleging overtime violations. The revered chef was compelled to pay thousands in lost wages to employees, which he did eventually and begrudgingly. (In the documentary “For Grace,” Trotter shouts and drives James Beard-winning chef Curtis Duffy from the restaurant’s front door.) Some of Trotter’s famed alums reportedly returned the money.
The latter case precisely represents the inherent issue of the looming shift to a no-tipping model. How exactly is the restaurant distributing that ancillary revenue? How can we as customers leave with a golden conscience, assured that our hard-earned money reaches the hard-working people who need it most?
The Proof Is on Your Plate Chefs, including Chicago’s own Grant Achatz, have emphasized the adverse effect of our country’s archaic tipping system on back-of-house employees including cooks sweating their way through not just service but hours of prep work before the doors even open, dishwashers scrubbing greasy pots and pans and washing your saucy scraps off the plate and the under-twenty-one boys polishing glass and silverware in the back corner. In my experience, they all habitually make half to two-thirds less than their front-of-house counterparts. Shouldn’t they benefit from the employer’s tax break?
Legally, back-of-house employees do not interact directly with customers and therefore are not eligible to receive tips. While a server’s income increases with each sale, a cook’s pay wobbles around minimum wage. As diners, we often ignore the harsh realities of these commonplace restaurant practices.
At Chicago’s One Off Hospitality, former assistant director of operations Katie Syracopoulos believes the social standing of restaurant work languishes behind the rest of the modern world. Opinions about the validity of a career in hospitality began to change in the nineties, she says, but people are only now feeling the repercussions of a national shift in what it means to be a restaurant professional.
“Teaching and training in some areas of the world begin in early childhood with the impression that those children will grow up to continue the family trade,” explains Syracopoulos. “Restaurant work is deeply embedded in their culture, so salaries and fixed wages make sense in those cultures just as a salary or fixed wage for a business executive is commonplace here in the US.”
Outside of the Fight for $15 movement to raise the minimum wage, a small number of states—Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington—have already eliminated the tipped minimum wage, requiring that employers pay the full state minimum before tips. In Montana, with the lowest wage of these seven states, that means $8.05 per hour; in California, with the highest, that means $10.00. Take heed that the increased wage paid by the employer has not eliminated the standard twenty-percent tip from the customer.
According to the US Department of Labor’s chief economist Dr. Heidi Shierholz, the subminimum wage for tipped workers results in those workers experiencing poverty at nearly double the rate of non-tipped workers. “Taxpayers end up subsidizing such low wages in the form of public assistance; in fact, nearly half of all tipped workers receive public benefits because their hard-earned incomes aren’t enough to cover the basics,” Shierholz writes on the USDOL blog.
Patrons who understand why they traditionally tip the wait staff and sometimes even other restaurant employees may assume that the restaurant pays anyone not a server or bartender at least the full minimum wage. Given the aforementioned cases of wage malpractice, at restaurants of all shapes and sizes in any state, in any city, that is hardly the case.
Many restaurants rely on customers to compensate the entire front-of-house staff, which is hardly legal but despicably pervasive. At one restaurant where I worked as a bartender, I was flabbergasted to learn that our bar back—first to arrive hours before service started and one of the last to leave—earned the same $4.95 as the bartenders and servers. In fact, even the quiet young man who spent the entire night polishing silverware and glasses next to the dirty dish bins made $4.95 per hour. How could either make close to minimum wage? Why, with the help of your tips of course!
The bar at The Radler in Chicago’s Logan Square, with co-owner Adam Hebert pouring a draft in background/Photo: Kristine Sherred
Side Work is Still, You Know, Work! Front-of-house workers, servers in particular, are all too familiar with “side work,” the term used to describe tasks essential to service that do not involve customers. Projects such as folding napkins, polishing glassware, emptying the trash and restocking paper towels are deemed side work. Some of this work occurs during service by support staff, but plenty of it occurs during the hour or two before service begins and sometimes hours after the server’s last table has departed.
Douglas Werman is a Chicago-based attorney whose firm, Werman-Salas, specializes in employment law. When a potential client sits down in his office, he and his partner ask specific questions about time spent doing side work: what kind, how long, with whom? His firm has always concentrated on employee rights with a large percentage focused on tipped workers, those found painfully often at the “bottom rung of the economic ladder.” As employees learn more about their rights, Werman-Salas has noticed an uptick in claims regarding illegally receiving the tipped wage for performing non-tipped work.
Frankly, says Werman, “employers love the tip credit because their customers, their patrons, subsidize their labor costs. That’s an incredible concept. The entire idea that customers, through gratuities, should be allowed to offset an employer’s obligation to the minimum wage is an anomaly.”
Whether small or large in scale, the harsh reality of FLSA violations remains grossly underreported by both employees and the media. This void in representation, posits Werman, is due to “a lack of resources, experience and track record.” The laws regarding tipped workers are “especially complicated” and, as Werman explains, “most tipped employees—actually most employees—don’t know their rights. In fact, many employers don’t really understand how the wage and hour laws operate with regard to tipped workers.”
Having worked as a server and bartender in Pennsylvania and Illinois, I never questioned how much I should be paid for working the hour before service started. That’s when I would polish plates, set tables, cut fruit and stock paper products in the bathroom. For that, I earned a whopping $2.13 in Pennsylvania and $4.95 in Illinois. After taxes, those wage paychecks amount to little or nothing. I always assumed it was acceptable—how could it happen if it weren’t?—that the money I made that night atoned for that hour or two lost in wages. Sadly, I never pushed to receive the $8.25 an hour to which I was entitled to in Illinois for the Sundays I spent scrubbing the fridges, lime-caked sinks and crusty salt shakers, and lugging racks of glassware or tubs of dishes downstairs to the dishwasher and running the dishwasher and carrying the clean plates back upstairs. This happened almost every Sunday in a restaurant that scheduled the dishwasher for 4pm despite opening at 11am.
I was paid $4.95 an hour. The dishwasher would cost $8.25. Who would you choose to do this work if no one was watching?
No Lifeguard on Duty Any restaurant that employs non-servers on the floor during service hours (food runners, server assistants, polishers) typically enlists those receiving tips directly from customers—the servers—to take part in a “tip-out.” One more constant controversy: restaurants are legally required to give handwritten notice and receive signed approval from the employee agreeing to the tip-share and the exact rate; again, this law is not often followed. Five restaurants later and no one has ever offered me a written tip-share agreement.
Based on a server’s sales, he or she is required to yield a certain percentage of their earned money (which, of course, consists solely of tips) to the bar and the support staff, two groups essential to smooth service. Here is where the situation gets sticky.
Before the age of plastic, serving was the gig of gods. The joy in walking home at the end of a long night with a few hundred dollars in your pocket in cash was unrivaled. Very little of a server or bartender’s income was reported on tax returns, though technically it should have been.
The convenience of credit cards has swiped most of the fun out of nightly tip-outs and leaves the employee’s income to idle in the employer’s house treasury until their accountant processes each checkout (the sheet generated from the point-of-sale system listing alcohol and food sales, taxes, tips entered and other such figures). This waiting period can take one business day or three depending on the urgency of the employer and the day of the week.
Therein lies the issue. The servers and bartenders—as well as bar backs, server assistants and glass polishers—are trusting their employers to give them what they technically, rightfully and lawfully own. Those tips are not property of the house but property of the employee who earned them. This is why Per Se took some heat. Current tipping laws prohibit the house from controlling gratuities of any kind, no matter what they’re called. As one of New York’s preeminent restaurants, their front- and back-of-the-house earn very competitive wages, but a tip is still a tip and only customer-focused front-of-the-house workers can lawfully receive one.
In early 2014, the National Restaurant Association, which touts itself as the leader of the “industry of opportunity,” became an outspoken opponent to the Minimum Wage Fairness Act, claiming that the law would cause irreparable harm to the restaurant industry. They claimed that “no server ever makes less than the minimum wage,” which might be true of most hip urban dining hotspots but maybe not so true of a quiet suburban Denny’s overnight shift.
Carl Moberg, manager and sommelier at two-decade stalwart Webster’s Wine Bar, wholeheartedly disagrees with those naysayers. A restaurant is just another business at the end of the day. “There is nothing inherently debilitating about livable wages,” he laments. Yet restaurateurs, lawmakers and customers alike take pains to separate them into something else entirely. He compares a restaurant to retail, where labor costs are not supplemented by consumer gratuity.
That terrible tip from table twenty-two ruined one server’s night, while another made a quick $50 on a serendipitous recommendation of the sommelier. Service chops aside, a server’s income is tethered to caprice and happenstance.
Thus Moberg yearned for a change, one that would “hone in on service…and [help the team] to function as one entity.” So before Webster’s moved from its original location in Lincoln Park, Moberg’s staff acquiesced to one week of pooling tips. The system, however, was “tragically flawed,” Moberg admits, even within their family-like team. Servers complained about their section, their customers, their share of the pie. Sound familiar?
In opening Webster’s 2.0 as a pooled-house establishment, Moberg, working within contemporary legal and cultural bounds, strives to offer his employees a steadier living, less reliant on the whims of one prodigal couple or bibulous six-top. More importantly, he stresses, he is deferring not only to current casual dining trends but also “selling a philosophy.”
These days, that philosophy seems much easier to swallow.
Webster’s Wine Bar in Chicago’s Logan Square/Photo Kristine Sherred
Pooled House Fooled House? Pooled houses exist, though diners may eat, drink and leave a generous thirty-percent tip expecting that their tip reaches the right people. Many tipping crusaders extol the virtues of preserving this power in the customer’s hands. One Off’s current vice president of operations, Kimberly Galban, says the Midwest’s hospitable inclinations sustain that tradition. “You want to show your appreciation for that great service,” she says, and omitting the opportunity to say thank you “takes away that part of the experience.”
As one of Chicago’s most successful hospitality groups, One Off’s practices are hard to question. I can caution from my experience at another restaurant not operated by One Off, however, that everything is not always what meets the eye.
Some establishments operate as pooled houses less by choice than by design, similar to my first bistro foray. Bartenders are more likely than servers to share tips at any number of restaurants to avoid the he-said, she-said bickering and to balance the nonstop action of a well bartender servicing the restaurant floor with the bartender easing those elbows on the bar. When I worked at the aforementioned restaurant, where I believe the bar back and glass polisher worked for the tipped minimum wage, our bar staff always shared tips equally. The cash-out was determined by number of hours worked. This way, the opening bartender who spent two hours preparing garnishes and stocking the wells didn’t suffer due to lack of customers and the closing bartender who spent an extra hour or two cleaning up left work rewarded for that effort.
I never received a written tip-share agreement as required by the FLSA, nor did I take issue with that reality because I had clearly never read the FLSA at that time. Our employer was also generally kind, communicative and transparent.
My bar colleague, however, eventually felt misled. He blamed the most tangible target: why were we only receiving at most fifty dollars in cash after a bustling Saturday night? We all used the same employee code for the point-of-sale system behind the bar, and the bar manager solely controlled the checkout and cash tips.
We approached our general manager, who seemed shocked at the possibility that management was pilfering the tips, asserting that ownership would investigate the matter and terminate the bar manager’s employment if it were true. Meanwhile, another bartender requested her tip-out sheet, which we were entitled to view. The inner details of this document contained tip history for each front-of-house employee, not just that of the employee who requested it, and revealed something even more grotesque.
It was not the cash.
The bar manager, as the credit card tips in front of us proved, was consistently earning anywhere from twenty-five to fifty percent of all tips on a given night. We knew he would take part in the tip pool when he physically worked behind the bar—only a couple hours on weekends and maybe a few on weekdays—but he was instructed to clock those hours accordingly. Otherwise, we presumed, he earned a manager’s wage. In reality, he was walking out with upwards of $200 in tips nightly, while the closing bartender earned well under that amount.
Because the bar manager also filed the checkout every night, our instinct blamed him. We were denied (not forcefully, but passively) a group meeting; the general manager individually discussed the matter with the five affected bar employees. At first ownership blamed the bar manager’s mischievous impulses, but the more I wrapped my head around the idea, the more baffling and unlikely it seemed. How could management and accounting have overlooked such grave discrepancies?
Then it dawned on us: they were in on this misappropriation of tips, and in a personal conversation with the GM—who I still admire and respect and want to believe was left out in the cold of this greedy ownership decision—he admitted as much but evaded blame. I was so stunned during this “arrangement” conversation that I could not muster the hard questions my better self begged to ask.
With the entire front-of-house tip records in hand, I crunched the numbers, matching the tips with each employee’s scheduled hours. I estimated that the bar manager received approximately $5,000 in credit-card tips over the course of three months that morally belonged to the rest of the bar staff, as we all worked under the guise of the manager receiving a manager’s wage, without tips. I sought the support of my fellow bartenders and the bar back, who likely suffered the grossest fiscal loss, to request a formal meeting with the owners—including the chef, the one person I felt had little to no idea about the extent to which his business partners had misstepped.
Slowly, my colleagues’ passion for the subject petered out and I succumbed to the itching notion that I had been pinned as the whistleblower, excluded from group discussions. Throughout my tenure at this restaurant, I maintained a meaningful relationship with the owners, despite working only part-time. I believe they respected me and I them, so this quandary catapulted a torrent of scattered emotions and nebulous misgivings. I wanted the truth.
My cash-theory colleague contacted Werman and I joined him. Werman concluded that in our particular situation, the employer likely considered the bar “manager” a tipped employee, and his participation in the tip pool was not breaking the law. “There is a difference between what is unfair and immoral and [what is] is illegal,” said Werman at the time.
Just as I and dozens of service-industry friends failed to second-guess those hours before and after service, tipped workers, Werman reiterates, are not “sufficiently educated to know when their rights are being violated.” Until we do, violations and gray-area maneuverings abound and employers themselves might not be aware of precisely what is going on in their restaurants. It benefits some to keep things vague.
Moving to the No-Tipping Model At Webster’s pooled house, the roadblock to an equitable tip structure has never been ownership—owners Tom MacDonald and Janan Asfour have embraced their manager’s credo—but rather the dining public at-large.
Meyer’s 2015 announcement sparked plenty of backlash. In inaugural weeks at The Modern, skeptical guests left extra gratuity on top of the service charge, while others grumbled of increased prices. Other restaurant owners, including successful hospitality groups right here in Chicago, deny the plausibility of a no-tipping model due to the small but mighty chance of missing subtlety within the Gordian laws or the simple fact of supposedly unsustainable costs.
“I know it can be sustainable,” counters Moberg, who would move to a no-tipping model in a heartbeat if the rest of the industry caught up.
At The Radler, a few blocks south on Milwaukee Avenue, Adam Hebert leapt unabashedly into the tip-free domain last fall, a month before Union Square in fact, but not before nearly a year of research, planning and preparing for the switch. Hebert sat each of his staffers down to explain the new system, individually, and, he says, not one disagreed. A small handful departed a few months later, but his core staff remains today.
His Logan Square beer hall opened in 2013 as a pooled house. Hebert’s imperative step one: eliminate the self-interest. “If [the employer] is doing shady stuff now,” he insists, “they’ll have a hard time transitioning into a no-tip restaurant. You can’t transition without the trust of your staff.”
At only twenty-eight years old, he speaks of the industry with simultaneous reverence and subdued defiance. This kind of tip-free, radical change “is not for everyone,” he admits. It might not fit the business model or management style. As for One Off, Galban says “it’s an interesting philosophy, but we’re standing back [for now] and watching it all shake out.” She and Hebert agree on one driving factor holding back an overall embrace levy: the cost, or perceived value, of food.
“People are unwilling to pay more for their food; that’s the problem,” says Hebert.
As minimum wage increases, more states may be obliged to eradicate the tipped minimum. But how does a restaurant running on razor-thin margins adjust? Galban stresses the importance of maintaining quality at a reasonable price.
In planning for the tip-free switch, The Radler also altered their business model, moving from more composed plates to standalone sausages and sides, moves that maintain quality and improve efficiencies.
“You find ways to make it work,” says Hebert. He is quick to add that every place is different but that he is excited about having an additional twenty percent of revenue in hand. It allows the restaurant to pay a living wage to everyone while also possibly bringing in more overall income. Just think what Gibsons, one of the nation’s highest-grossing restaurants, could do with another six-million dollars potentially procured by raising the price of every menu item by twenty percent. (That six million figure is twenty percent of Gibsons’ estimated annual sales of $22.4 million.) Perhaps the dishwasher, Syracopoulos’ “unsung hero of the restaurant world,” could make a decent living.
Hebert developed a work-reward system (Meyer and a few other tip-free establishments have conversely instituted a revenue-share program) that benefits not just the front-of-house but also the back. It appears to be working. The Radler once suffered from the same cook shortage reported plentifully this past year, seeing a mere two applicants in twelve months. But since becoming no-tip and increasing back-of-house wages, good cooks regularly call, email and walk in the door unannounced. Hebert thinks the chance to work in that kind of environment powerfully resonates with people.
“The benefits have been incredible,” he says. “It’s blown me away in the change of culture in our restaurant. People want to work.”
Servers who consistently lusted after the busy weekend shifts now happily work Tuesdays, side work is a non-issue at upwards of $16 an hour, and many employees take on additional responsibilities like inventory management and locking up for the night. If you grow, so does your paycheck.
Support staff (bussers and food runners in particular) have perhaps gained the most, says Hebert. Previously, the server was the most coveted position in a restaurant for having the highest monetary potential. Now the strategy is professional growth. A busser who wants to learn about the food and drink will train to be a runner or bar back, get a bump in pay and evolve to become a server or bartender—and get another bump.
In With the Old As I write and as you read this, another restaurant has quietly made the switch, while another began toying with the idea. An eighth state or another of many city legislatures will fight for an increased minimum wage for not just fast-food workers but all workers. Perhaps even a group of like-minded individuals will reincarnate the The Anti-Tipping Association.
In my opinion, for what it’s worth, the end is near.
It won’t be easy. People hate change, and Americans, if current events can be at all deemed some bizarre barometer of sanity, like to be in control. Some proponents consider tipping a power. What other industry in our modern society asks the customer to arbitrarily determine the value of a product or service? If it is a power, then let the business decide what to do with it.
Food and drink are central to a happy culture. The restaurant industry employs more than fourteen million Americans, some you can see and some you can’t.
Eventually, postulates workers’-rights lawyer Werman, the tipped wage will be nothing more than an anachronism and employers will be required to pay the full minimum wage. He doubts, though, that federal legislation will abolish the tipped wage entirely. “It depends on the particular state and the legislative courage required to make such a radical change to long-standing wage and hour laws,” he says.
Since Meyer championed the hospitality-included model, more than two dozen New York restaurants have followed suit, not to mention handfuls more from San Francisco and Brooklyn to Pittsburgh. In Chicago, The Radler and a few others—including Next, Alinea, The Aviary, Acadia, 42 Grams, EL Ideas and Elizabeth—include a service charge, though Hebert has quietly spoken with a few other restaurateurs on the matter. Others, notably Baker Miller and Honey Butter Fried Chicken, compensate their staff with competitive wages and benefits.
Minimum wages, legislative handouts and employer costs will increase, but so will the livelihoods of those striving to provide a home away from home for each and every person who walks through their door.
The Radler, each of One Off’s admired locations, my former employer and most any caring restaurant and its employees each share a single ideology: it’s all about the hospitality. So let’s thank those who make for a wonderful restaurant experience. Or, in Hebert’s fine words, “Let’s just get rid of this fucking pie and eat some fucking cake!”
