Leave the system for tipping employees alone

February 17, 2019

House Bill 31 would raise the minimum wage in the state of New Mexico. Snuck into this bill is the elimination of the “tip credit.”

This tip credit allows restaurant owners to pay a lower hourly rate to tipped employees as long as the worker always takes home over the minimum wage. Eliminating the tip credit would be a disaster for tipped employees, restaurant owners and customers. In the 45 years since my mother started Tomasita’s, we have never lobbied against the living wage, soda taxes, plastic bag bans, straw laws or anything else. However, this policy would be so damaging to our business, employees and customers that I am doing everything I can to get it fixed.

Let’s clarify some misconceptions. There is no “lower minimum wage” for tipped employees, and there never has been. Tipped employees must take home at least the minimum wage ($11.40 per hour in Santa Fe, increasing to $11.80 on March 1) through the combination of the direct hourly pay from their employer and the tips they earn.

If the combination of the hourly wage and tips does not equal or exceed the minimum wage, the restaurant must pay the tipped employee the difference. There are serious penalties for restaurants that fail to follow the legal requirements that guarantee tipped employees at least the minimum wage. It would be wage theft and is illegal.

While the existing law guarantees that tipped employees make at least the minimum wage, most earn more. Our servers average between $18 and $25 per hour, while those at fine dining establishments earn much more. Servers at chains and diners take home less on average, but still well over $11.40 per hour.

If this law passed, I would need to give every full-time server a $16,000 per year raise, and every busser a $10,000 raise in their hourly pay. Anybody with any business understanding or common sense can see that I cannot afford to do this by “raising my prices a little.” In my case, my labor cost would go up 25 percent, and I would need to raise my prices about 10 percent to theoretically break even. This would make us unaffordable to Santa Fe natives who are not wealthy. Business would go down and I would need less workers.

The tip credit has been eliminated in seven states. Restaurants have responded in the following ways:

u Eliminate servers and other jobs and go to a counter service model.

u Use technology and efficiency to save labor overall. For example, corporate chains are starting to put iPads on their tables where you can order your food and swipe your credit card.

u Add a service charge. Rather than raise menu prices, restaurants are now adding mandatory service charge on each check, and using that money to pay the higher hourly wages to tipped employees. This last option leads to less income for those servers whose jobs were not eliminated. When a restaurant uses the tip credit, 100 percent of tips legally must go to the service worker. With a service charge, the owner decides what happens to that money.

What happens to worker’s income? Research by the Census Bureau concludes that reducing or eliminating the tip credit does not lead to more income for tipped employees.

What is most frustrating about this law is the complete lack of consultation with the restaurant owners, the tipped employees, or independent academic research on that policy. The sponsors of this bill and its supporters insist that waiters will end up with more money in their pockets. They refuse to listen when we show them that this is not possible. They tell us we are greedy and are “fear mongering.” Nothing could be further from the truth. New Mexico is poor and ranks 49th and 50th in many indicators or well-being. When our elected leaders advocate polices this misguided, it’s no wonder.

George Gundrey is the owner of Tomasita’s Santa Fe, Tomasita’s Albuquerque and the Atrisco Café & Bar.