Minimum Wage is Increasing - Now What?

December 1, 2016



Regardless of how you felt about Amendment 70 (Colorado’s minimum wage ballot initiative), most of you will be impacted by it.  We have received many questions from our members about how other restaurants plan to react. 

First, to clarify, Amendment 70 is a constitutional amendment that increases Colorado’s minimum wage to $12/hour and the tipped wage to $8.98/hour by January 1, 2020.  The passage of this amendment raises Colorado’s minimum wage as follows:

January 1, 2017:                $9.30/hr.             Tipped Wage = $6.28
January 1, 2018:                $10.20/hr.           Tipped Wage = $7.18
January 1, 2019:                $11.10/hr.           Tipped Wage = $8.08
January 1, 2020:                $12.00/hr.           Tipped Wage = $8.98

After that time, wages will increase annually according to the Boulder/Denver/Greeley CPI.  They will not decrease in the event of a recession. 

What are restaurants doing to cope with these increases? 

Each of you will have to determine the right mix of how you will manage this increase.  When we surveyed our members on a similar increase in 2015 they responded as follows:

  • 89% will increase prices
  • 72% will reduce hours for employees – ex:  keep a smaller staff for traditionally slower times
  • 71% will reduce # of employees – Some restaurants have told us that they are eliminating bussers or runners for example
  • 20% will consider closing locations
  • Some may decide to add a service charge
  • Some have mentioned trying tip pooling as a way to help with pay equity 

What is a service charge? What is a tip? What is a tip pool? How can I use them legally?

Under both Colorado and Federal law any charge that is automatically applied to the bill and the customer must pay, even automatic gratuities for large parties, is considered a service charge. There are very distinct differences between tips and service charges, here are just a few.

Tips:

  • Are given freely from the customer to the employee, where the customer, in his/her sole discretion, decides whether or not to tip and how much
  • Belong to the employee, not the restaurant
  • Management cannot direct the use of that money
  • Sales tax is not applied to a tip

Service Charge:

  • Is anything automatically applied to the bill
  • Is considered revenue of the business
  • Management can determine how the money will be used
  • Funds can be given to the employee, but must be done through the payroll system
  • Any money given to the employee from the service charge cannot be counted towards a tip credit
  • Restaurants must collect appropriate sales tax

Tip Pool:

  • Employers may run a tip pool but they must comply with certain requirements
  • The employer must provide written notice to all employees who will be participating in the tip pool prior to their participation
  • Only employees who customarily and regularly receive tips can participate in the tip pool. According to federal law, servers, counter personnel, bussers, and service bartenders can clearly participate. Those that can’t participate are owners, managers, supervisors, janitors, dishwashers, chefs, cooks, and food prep personnel
  • If you are thinking about organizing a tip pool, please contact the CRA to ensure you are administering it correctly

Is there a chance that we can correct the flaws with amendment 70 by altering the tipped wage or adding a learning wage? 

  • We believe that to be nearly impossible.
  • Only one time in the last 100 years was something added to our constitution and later removed – prohibition.
  • In order to change the constitution – as we saw with amendment 70 – we would need to raise millions of dollars just to get it on the ballot – and another several million to educate the public.  For this issue – many of our members who were adamantly opposed to it didn’t give to the campaign to defeat this.  
  • Meanwhile, the unions who initiated this have very deep pockets and would fight it heavily.

Is there any positive news here?

 
With the passage of amendment 71, it will be more difficult to make any future constitutional changes. We know the unions want to ultimately increase minimum wage to $15/hour and eliminate the tip credit, and they are pushing things like restrictive scheduling, i.e. eliminating flexibility in restaurant scheduling. Getting these enacted will be much more difficult for them now.

Use our Minimum Wage Worksheet to help develop your own plan.


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