Will Tipping at Restaurants Make Sense in a COVID-19 World?

tipping at restaurants

Will Tipping at Restaurants Make Sense in a COVID-19 World?

For a deep dive into the future of labor check out The Complete Restaurant Reopening Guide.

Tipping at restaurants has always been a contreversial issue. Before the COVID-19 outbreak, the food industry was one of the fastest growing in the US, with many food preparation and serving jobs available to both US citizens and immigrants.

Since the US government and state authorities started shutting down restaurants, millions of workers were laid off.  Up until the virus outbreak, these workers made as little as $2.13 an hour, the federal minimum wage. In most states, employers can pay workers less than the minimum wage as long as they reach it with tips.

But while tipping is considered a cultural consensus and workers themselves are often in favor of it, it also exposes workers to racism, sexual harassment and unequal pay. COVID-19 seems to have unveiled some truths regarding the practice of tipping we can no longer ignore.

Here’s where the experts think the tipping industry is going.

Table of Contents

Tipping Laws

Tipping laws vary across different states. Federal law requires that employers follow whichever law – federal, state or local – is the most generous to employees. California is one of the 7 states that have a one fair wage which says employers can’t count tips towards a minimum wage. Employers must pay employees at least the California minimum wage and then top that with the tips they received.

Employers may require workers to put their tips in a “tip pool” that is later divided fairly between all “chain of service” workers. This group of workers includes servers, bartenders, hosts and bussers and excludes cooks, dishwashers and cashiers.

Excluding the back-of-house workers is one of the problems with tipping. These workers usually don’t get to enjoy the tips and it creates tension between back and front-of-house workers instead of promoting teamwork.

Tipping usually doesn’t correlate with good service or sales. Many diners tip according to the mood they’re in that particular day, the kind of clothes the server’s wearing or the server’s race or gender. But rarely, the arbitrariness of tipping may surprise restaurant workers.

Just last March, a man left a $2000 tip for the staff to split at North Bay restaurant Buckeye Roadhouse. He says it was a spontaneous act of generosity to try and help out amid the crisis, but these kinds of generous acts are rare.

What’s Wrong with Tipping?

back of house tipping

Saru Jayaraman, co founder and president of the nonprofit Restaurant Opportunities Centers United and director of the Food Labor Research Center at the University of California, Berkeley, says the COVID-19 crisis has unveiled the many wrongs that were for so many years dominant in the food industry.

The effort to fight for food service workers’ rights and minimum wage has been blocked for years under the claim these workers are getting paid fairly after tipping. However, current events have shown that in an economic crisis, these workers are left with nothing when they’re being laid off from their jobs.

The “subminimum” wage food service workers made over the course of their working years does not make them eligible for a decent unemployment rate. According to the Economic Policy Institute, one out of six restaurant workers lives below the poverty line. Twice as many can’t earn enough to cover basic things like food, rent or healthcare.

Today, only seven states have a one fair wage that allows workers to get the minimum $15 hourly wage and then tips. In most states, restaurant workers will get unemployment based on $2-$3 an hour (the subminimum most states pay) if they’re found eligible.

The “No Tipping” Policy

no tipping policy

In 2015, CEO of the upscale Union Square Restaurant Group, Danny Meyer announced his restaurants will gradually eliminate tipping.

Initially, when Meyer launched his new no-tipping policy, what motivated him was the pay disparities between back-of-house workers and front-of-house workers as well as the discrimination tipping causes. Meyer sought to fight the harmful impacts tipping has on food service workers, especially for minorities, women and immigrants.

Meyer’s challenges in implementing the no tipping policy were many. To cover all of the restaurants’ operational costs as well as providing his workers with sick pay, family leave and other benefits, he had to make modifications to the menu pricing. He also had to consider dining room compensation needed to be competitive with other restaurants where tipping was still customary, so that his workers won’t leave.

While food service workers employed in restaurants that adopted the no tipping policy understand the rationale behind such a shift, it impacts their salaries greatly. Many workers had to leave because they started earning significantly less money.

Many other restaurants followed on the “no tipping” trend, realizing for themselves how unjust the tipping method can be. By May 2016, Meyer’s step in the no tipping direction had created a wave reaction. That month, American Express released a survey that sampled 503 random restaurateurs, 18% had already implemented the no-tipping policy, 29% planned to do the same while 17% said they’d consider it if others did.

Carl Heinrich, chef and owner of Richmond Station in downtown Toronto, for example, says after he got rid of tipping in the end of July this year, “from the customer’s point of view, this has been a really positive change”.

Heinrich has adopted the “Hospitality Included” policy and has raised menu prices by 18% to include service. His goal was to provide his employees with the same safety net other professions have.

Is the “No Tipping” Policy Practical?

But some restaurateurs had to drop their “no tipping” policy long before COVID-19 struck our shores. David Stockwell and wife Carla Swickerath opened their Italian-American bistro Faun in August 2016 as a tip-free establishment.

This was a time when they, along with other restaurateurs believed this is going to be a rising trend that will sweep the nation. But by 2017, Stockwell says: “it was a miscalculation” and that Faun is struggling. First week of 2018, Stockwell reinstated tipping because even though the ethical rationale behind no-tipping mattered to both of them “they couldn’t let the ship keep sinking”.

By 2018, most restaurants that followed the “no tipping” movement had rescinded their efforts. Even Meyer’s own organization never quite came to and late July this year, Meyer announced that he’s dropping his 5 year long “Hospitality Included” policy as restaurants prepare to reopen.

One of his biggest considerations was the fact he had to lay off more than 2,000 workers back in the spring when restaurants were ordered to shut down due to the outbreak of COVID-19. He worries workers may not want to return if they felt there’s not enough money in it for them.

He also doesn’t want to hold back any extra compensation workers may get that can help them in this economic crisis: “We don’t know how often people will be eating out … we do know that guests want to tip generously right now”. Meyer said.

This July, Marketplace released a report saying restaurant traffic declined by 60% in certain parts of the country. According to BBC, however, those who are ordering out tend to tip generously, showing a rise of nearly 15% for Grubhub and Seamless drivers, and up 99% for Instacart shoppers since the start of the pandemic.

While people are becoming more generous with tipping is good news for delivery workers or servers in dining rooms, back-of-house workers are still getting the short end of the stick, especially now when they have to rise to the occasion and adapt themselves to new, challenging changes created by COVID-19.

Tracy Singleton, owner of the farm-to-table birchwood cafe says COVID-19 is actually the best time to start implementing the no tipping model. She says before COVID-19, it was harder to take tips away from workers since it’s endangering their livelihood. Since everyone’s livelihood is now in danger because of the pandemic, Singleton believes guests will be more empathetic to restaurant workers and more open to menu prices including service.

Michael Lynn, a professor of consumer behavior at Cornell University and an expert on tipping, says that restaurants should use the change COVID-19 has created since it serves as a “ready explanation for raising menu prices.”

Lynn explains that: “under the circumstances, we’ve got extra cost. We’ve had to implement whatever safety protocols and we have less seating capacity. And so, the cost of business has gone up, we have to charge more. And I would think that customers would understand that.”

But by reinstating tipping, restaurant owners are also reinstating the conflict between back and front-of-house workers over differences in income. To weather that, Meyer’s instituting a revenue-sharing system for back-of-house employees making their overall compensation rise up 20-25%: “We’ve come to believe that it’s the inability to share tips that is the problem, not the tips themselves”. 

"The inability to share tips is the problem, not the tips themselves"
Danny Meyer

Mind you, in New York and Washington DC as well as other states, back-of-house workers can’t legally share in the tips front-of-house workers are collecting.

The Future of Tipping

Jennifer Bennett, part owner of San Francisco bistro Zazie is confident that tipping will ultimately become a thing of the past in the US. “The inequality between the front and the back of the house has got to change,” she says. “We can’t keep having these people working in hot miserable conditions for 10 hours a day, making a third of the money of the cute bartender.”

"We can’t keep having these people working in hot miserable conditions for 10 hours a day, making a third of the money of the cute bartender."
Jennifer Bennett

Co-owner of Zazie, Megan Cornelius says: “These workers have been deemed essential and are putting themselves at risk. To walk out with a living wage that is secure and accurately coincides with how much they sell in a night, and isn’t reliant on the whim of guests … is actually extremely important, now, more than ever.”

The model Meyer is going for will ideally resemble the one instituted by restaurateur Jesse Cool in California where it’s legal to share tips with all employees when a full minimum wage is being paid, also called “One Fair Wage”.

Cool calls the model “Heart of the House” and it motivates all employees to work together by earning the same salary, which can then be topped with the tips coming in from the restaurant’s guests. Creating an atmosphere of teamwork in the restaurant, where both front and back-of-house workers feel equal will benefit the staff as well as the diners.

Although the plan seems faultless, there’s yet a long way to go when it comes to legislative steps to ensure this model can be implemented throughout the country. Until then, it’s important restaurateurs stay flexible in their views and see what works best for them and their staff.

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