SENATE BILL: Amendment to The Productivity Equalization...Act... (Redrafted)

[Fmr. Pres. Duke]

Well, if we eradicate the minimum wage exception for tipped positions, it means I no longer have to tip. Success, right?

I'd be worried about how this would effect the service industry in general. Asking restaurants to pay their service 2-3x what they currently are will force them to raise food prices and undoubtedly hurt their top lines. Servers in these places may in turn make even less money than they do now. In theory it sounds good for employees, but in practice, I could see it having a negative impact on them.

I know in Europe, servers are paid a good salary and people do not tip, but I know nothing about their business model and how they keep food costs reasonable. Maybe someone can educate me on that. As someone who has worked in tipped positions in the past, a lot of people actually made MORE money in them than if they were in management and salaried.

[Fmr. Pres. Duke]

It is a 4-4 tie right now with myself and Gass not voting.


Duke, are you eying a redraft for this at present?

Yes, I am a friend to our restaurant industry, and as a Greek and a nephew of a former restaurant owner, the last clause in this bill would really hurt far more than it would help. I explained my reasoning above. TNF's heart is in the right place, but sometimes we need a heartless person like me to even things out.

[Fmr. Pres. Duke]

How do European countries handle things like this? Their business structure is different than it is here, and their tipped employees do make a decent salary but make far less in tips than their American counterparts. I remember some places in Europe refused to take tips!

If we can do this without having a detrimental effect on the restaurant industry, which is a massive one in this country, I am okay with it. But as it stands right now, hiking the minimum wage would really hurt them and indirectly hurt those in tipped position because companies will a) hire less b) be forced to raise food prices.

That said, I am open to a scaled increase, and to perhaps monitor its progress. If we begin seeing a negative impact on the industry, we can repeal it. I am not sure. This could be a game breaker for many small restaurants around this country and that is not something I am terribly comfortable with. An immediate increase is out of the question though - that would liken to an economic shock, an increase from $2 to $10 immediately, and no one wants to see that.

Let me do some research on this, but a redraft is obviously going to come.

[Fmr. Pres. Duke]

Thanks for the warning. I better start my researching.

[Fmr. Pres. Duke]

I'm going to be late on this, but I want to get a redraft in with scaled like TNF proposed. My last exam is on Friday morning and after that, I will be back to full capacity.

If you all have proposals and what have you, please go ahead and post them here so I can propose my redraft before time expires. I think Saturday is my deadline, which works for me.

[Fmr. Pres. Duke]

It is important to note that the US Labor Department found that the average hourly rate of a tipped position was $11 in 2012, and it went much higher. If we did pass this law raising the minimum wage to X amount and presumably charged a service charge like European restaurants, that stands to hurt servers in high end restaurants.

PERHAPS we can do something like an opt-in program, where a server can choose either the hourly wage or the tipped wage?

http://articles.chicagotribune.com/2012-04-25/opinion/ct-perspec-0425-tips-20120425_1_minimum-wage-restaurant-employees-tip

My source for my information from the Chicago Tribune. Food for thought. Carry on, senators.

[Fmr. Pres. Duke]

Well, $11 as an average is absolutely unacceptable considering the current minimum wage. I mean, that means a ton of people are making below $11 as well.

Right, which is why maybe we should look at an opt-in clause or something? I don't know. I just know that at high end restaurants, servers make far more than minimum wage. My cousin served at a 5 star restaurant here in town and make $100,000 a year on tips + $2.00 or whatever they paid him.

If we do raise the minimum wage, we will have to structure it like Europe does to pay servers a salary.

[Fmr. Pres. Duke]

That's fine if we are okay with eradicating tipped positions and moving towards the European style service charge + higher wage.

Given my crunch for time, I'd rather go with this than nothing at all. You're a lucky man, TNF.

[Fmr. Pres. Duke]

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2. The minimum wage for tipped employees shall, upon the passage of this legislation, automatically adjust for increases in worker productivity and inflation at the same rate as does the regular federal minimum wage.

3. The scaled increase to the minimum wage for tipped employees, as noted in Section 1 shall expire on January 1, 2020 and the tipped minimum wage shall, at that point, be equalized to the regular federal minimum wage. There shall, from January 1, 2020, be no difference in the federal minimum wage for tipped and other employees.

4. From the period between January 1, 2014 to January 1, 2020, tipped employees may 'opt-out' of the compensation adjustment for tipped employees. In doing so, tipped employees shall be paid the previous federal minimum wage for tipped employees until the next scheduled increase, at which point they will be once again asked whether or not to 'opt-out' of it.
   4a. Tipped employees having opted out of the compensation adjustment schedule shall be paid a gratuity of 20 percent automatically charged on all purchases by any employer employing tipped employees foregoing the compensation adjustment schedule.
   4b. Effective January 1, 2020, the opt-out provision of this law and the automatic gratuity charge shall be terminated and all employees currently paid in tips instead paid the federal minimum wage.

5. Restaurants shall not charge a service charge exceeding 15% on services rendered by employees who have opted in to the compensation adjustment program.
[/quote]

I added a fifth bullet to the 4th section. The average service charge in European restaurants is 12%, so I expect we need to at least clarify and regulate restaurants charging obscene service charges and pocketing the money themselves.

With this opt in clause, we can at least see if the program is having its intended effect. If it hurts people tremendously, we can always repeal it. I just hope it will do more good than harm.

Feel free to discuss this as you wish. I wanted to get this published before I went back to studying and/or time expired.

[Fmr. Pres. Duke]

Restaurants in Europe have a service charge on all their bills and supposedly pay their help that way. I don't think we can simply raise the wage rate and call it a day. That isn't how it works overseas either. A service charge replaces a tip which pays the employees. From my understanding, you may tip more afterwards, but you aren't really required to like we are here.

So, with this bill, we are assuming that we want to replace our current system with a European type one. Businesses will have to charge a service fee (I think 20% is too high given it is only 12% overseas) to offset the lack of tips.

Those are my thoughts. I am studying for my commercial law exam, so I can't really participate in the debate much more tonight, but I will try to this weekend. I just wanted to propose this before the time expired.

[Fmr. Pres. Duke]

Okay, let's just reject this redraft and resume debate if that's what we have to do. I'm unclear on the process honestly.

[Fmr. Pres. Duke]

The only problem I have with your amendment is with the 5th point.

The way I am understanding the business model of European restaurants/service positions is, the restaurants charge a service fee instead of asking patrons to tip. They use this fee to fund the salaries of their employees.

I don't think it's plausible for us to eliminate BOTH tipped positions and forbidding restaurants to charge a service fee while demanding they pay their workers minimum wage. If we did that, we would do a lot of harm to the industry and put a lot of places out of business. The profit margin for restaurants is already pretty thin, around 1-2%, and that's with the current system.

[Fmr. Pres. Duke]

The only problem I have with your amendment is with the 5th point.

The way I am understanding the business model of European restaurants/service positions is, the restaurants charge a service fee instead of asking patrons to tip. They use this fee to fund the salaries of their employees.

I don't think it's plausible for us to eliminate BOTH tipped positions and forbidding restaurants to charge a service fee while demanding they pay their workers minimum wage. If we did that, we would do a lot of harm to the industry and put a lot of places out of business. The profit margin for restaurants is already pretty thin, around 1-2%, and that's with the current system.

Hm, with more consideration, I think you might be right. How about we put back the 15% standard, then?

That works for me. Whatever bill we decide on, I want to make sure we aren't screwing thousands of small businesses in the process. Most restaurants are not cash cows. We have to keep that in consideration.

[Fmr. Pres. Duke]

You must be logged in to read this quote.

2. The minimum wage for tipped employees shall, upon the passage of this legislation, automatically adjust for increases in worker productivity and inflation at the same rate as does the regular federal minimum wage. The previous chart shall not be construed to deny a minimum wage adjustment based on inflation or increases in productivity to any employee.

3. The scaled increase to the minimum wage for tipped employees, as noted in Section 1 shall expire on January 1, 2020 and the tipped minimum wage shall, at that point, be equalized to the regular federal minimum wage. There shall, from January 1, 2020, be no difference in the federal minimum wage for tipped and other employees.

4. From the period between January 1, 2014 to January 1, 2020, tipped employees may 'opt-out' of the compensation adjustment for tipped employees. In doing so, tipped employees shall be paid the previous federal minimum wage for tipped employees until the next scheduled increase, at which point they will be once again asked whether or not to 'opt-out' of it.
   4a. Tipped employees having opted out of the compensation adjustment schedule shall be paid a gratuity of 20 percent automatically charged on all purchases by any employer employing tipped employees foregoing the compensation adjustment schedule.
   4b. Effective January 1, 2020, the opt-out provision of this law and the automatic gratuity charge shall be terminated and all employees currently paid in tips instead paid the federal minimum wage.
   4c. Employers may not be deny the right of employees to opt in or out of a tipped compensation program. Denying a worker such a right is punishable by law and may result in the loss of one’s business license and/or a fine of up to $25,000 per denied employee.
   4d. Employers and employees must indicate the form of compensation on tax documents from any jurisdiction. All jurisdictions must recognize both forms of compensation for currently tipped employees.

5. Restaurants shall not charge a service charge exceeding 15% on services rendered by employees who have opted in to the compensation adjustment program.
[/quote]

Let's consider this form. I included your changes but left the service charge I had on my original bill.

[Fmr. Pres. Duke]

Yep. I just proposed it above. Hopefully that can serve as my redraft instead of having to vote and amend.

[Fmr. Pres. Duke]

Yep. I just proposed it above. Hopefully that can serve as my redraft instead of having to vote and amend.

Oops, my bad, somehow missed that.

We are all at the mercy of Yankee. I hope he lets this be my redraft so we can pass this. We've spent plenty of time on this bill.

[Fmr. Pres. Duke]

A vote is now open on the President Redraft below, Senators please vote Aye, Nay or Abstain.

You must be logged in to read this quote.

2. The minimum wage for tipped employees shall, upon the passage of this legislation, automatically adjust for increases in worker productivity and inflation at the same rate as does the regular federal minimum wage. The previous chart shall not be construed to deny a minimum wage adjustment based on inflation or increases in productivity to any employee.

3. The scaled increase to the minimum wage for tipped employees, as noted in Section 1 shall expire on January 1, 2020 and the tipped minimum wage shall, at that point, be equalized to the regular federal minimum wage. There shall, from January 1, 2020, be no difference in the federal minimum wage for tipped and other employees.

4. From the period between January 1, 2014 to January 1, 2020, tipped employees may 'opt-out' of the compensation adjustment for tipped employees. In doing so, tipped employees shall be paid the previous federal minimum wage for tipped employees until the next scheduled increase, at which point they will be once again asked whether or not to 'opt-out' of it.
   4a. Tipped employees having opted out of the compensation adjustment schedule shall be paid a gratuity of 20 percent automatically charged on all purchases by any employer employing tipped employees foregoing the compensation adjustment schedule.
   4b. Effective January 1, 2020, the opt-out provision of this law and the automatic gratuity charge shall be terminated and all employees currently paid in tips instead paid the federal minimum wage.
   4c. Employers may not be deny the right of employees to opt in or out of a tipped compensation program. Denying a worker such a right is punishable by law and may result in the loss of one’s business license and/or a fine of up to $25,000 per denied employee.
   4d. Employers and employees must indicate the form of compensation on tax documents from any jurisdiction. All jurisdictions must recognize both forms of compensation for currently tipped employees.

5. Restaurants shall not charge a service charge exceeding 15% on services rendered by employees who have opted in to the compensation adjustment program.

[/quote]

I have returned from my holiday drought!

X Duke