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How a Workers Co-op Ran Afoul of the Labor Department
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Dan Clore
Dec 20, 2012, 1:23:50 AM12/20/12
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News & Views for Anarchists & Activists:
http://groups.yahoo.com/group/smygo
http://www.slate.com/articles/business/small_business/2012/12/restaurant_tip_pools_how_even_co_ops_can_run_into_trouble_with_labor_law.html
Please, Do Not Tip Your Server
What happened when a worker-owned co-op restaurant ran afoul of the
Department of Labor.
By Joe Donatelli|Posted Wednesday, Dec. 19, 2012, at 9:45 AM ET
Casa Nueva is everything one would expect of an independent,
worker-owned restaurant in a funky, progressive college town like
Athens, Ohio. The walls are lined with jewelry and art for sale.
Children�s drawings are tacked above tables. Its low prices, locavore
philosophy, and good beer selection help it attract students, faculty,
and townies.
Not exactly the kind of place that would draw the attention of the
Department of Labor, right? Wrong. But because of such recent scrutiny,
diners at Casa are now greeted with more than a friendly hello from
their hosts. Everywhere customers look�on the menus, in the window, on
placards, they are reminded of Casa�s new policy, which took effect in
September: No tips. What gives?
Casa Nueva long ago settled on a system of pooling all tips from a given
pay period and dividing them equally between all employees based on how
many hours they worked that pay period. �What we truly believed in was
that everybody, from the dishwasher, the prep cook, the cooks, the
servers, provided the customer�s meal, so they should share in the
tips,� said 25-year worker-owner Nancie Buerkel.
Problem is, back in February, the Department of Labor issued �Field
Assistance Bulletin No. 2012-2,� which announced that it would enforce
regulations regarding what its spokesman Scott Allen called �the
inaccurate use of tip credit.� The Federal Labor Standards Act lets an
employer take a tip credit �toward its minimum wage obligation for
tipped employees equal to the difference between the required cash wage,
which must be at least $2.13, and the federal minimum wage,� which is
$7.25. Allen said the department in 2011 addressed very specific
information related to pay and authorized use of tips. Tip pools are
legal, but a "valid tip pool may not include employees who do not
customarily and regularly received tips, such as dishwashers, cooks,
chefs, and janitors��the very employees with whom Casa servers shared
their its tips.
Since issuing the field bulletin, the Department of Labor has cracked
down on restaurants for paying tip-earning employees less than minimum
wage while they performed non-tip-earning duties, making employees turn
tips over to management (which caused worker pay to fall below minimum
wage), and giving tips earned by tip-earning employees to
non-tip-earning employees.
Even though Casa Nueva�s tip-pooling scheme was the definition of
fairness, it did not adhere to the letter of the law. Casa could have
paid its dishwashers and cooks $7.25 an hour and nothing more, and let
servers end up much better off. Instead, as Buerkel explains, new
associates all earned less than minimum wage for their hourly rate, but
when the tip pool was added and then divided, they were paid �way more�
than minimum wage. As a result of a Department of Labor audit that
lasted several days, Casa had to change its practices.
The Department of Labor does not track how many worker-owned businesses
have been affected by the tip regulation, though it says it has
collected than $2.6 million in back wages in the last fiscal year for
more than 600 workers who did not receive the minimum wage or proper
overtime compensation.
How did a co-op get caught up in the federal government�s effort to
force restaurants to compensate employees fairly? Casa Nueva workers
believe that someone at another local restaurant advised a visiting DoL
rep to stop by Casa Nueva, where, according to 13-year worker-owner
Sheri Harvey, the rep �had never seen a business like us.�
As a co-op, Casa Nueva adheres strictly to egalitarian values.
Worker-owners have an equal vote at monthly company meetings, which are
open to Casa�s 55-60 associates. Like most socialist paradises, it�s a
bureaucratic quagmire. �We have meetings to talk about having meetings,�
said Buerkel. The member handbook is a stout 67 pages.
Allowing servers to keep tips was not considered an option. �There is a
potential for real inequality there,� said worker-owner Matthew Paul,
who has been at Casa Nueva for seven years. �We wanted to do whatever we
could to keep it equitable across the board.� And while letting
employees split tips on their own is legal, it was never considered at
Casa Nueva. �It would have been a nightmare,� Buerkel said.
Two options emerged that would allow the restaurant to follow the new
labor rules: Add a service charge at the end of the meal or raise menu
prices. That tipping is a voluntary act was not acknowledged. No matter
what, a customer�s presumed gratuity would be added to the bill.
Opinion was split evenly between both options, according to Harvey, who
supported raising prices. �I felt like (a service charge) was a double
whammy because what if the service wasn�t good and the food was wrong?
Then all of the sudden I�m like, �Twenty percent service charge!� I
didn�t like that. I would rather say, �This is what the price of our
food is.� I�m still going to give you the good service.�
When it turned out that raising prices was easier on the restaurant�s
point-of-sale computer system, the worker-owners voted unanimously (all
votes must be unanimous) to raise menu prices based on previous tip
averages and the cost of goods and labor expense.
Now, new associates still earn less than minimum wage, but the increased
revenue generated by higher prices is paid to employees as a separate
�revenue wage,� which brings their compensation back to an amount
similar to what they earned before the no-tips policy took effect.
Customers have greeted the new policy with a mix of humor, empathy,
disappointment, and more than a few comments about how The Man is coming
down on the Little Guy. A few customers have gotten creative, drawing
pictures for their servers or leaving notes of thanks. One penned a rap
song on the back of a receipt. All money left on the table is donated to
charity. In September, tips were given to community food initiatives.
(Disclosure: I eat at Casa when I�m in Athens and not tipping the
friendly wait staff and bartenders for good service feels�there�s no
better word for it�wrong.)
Asked whether the Department of Labor�s actions make her wish the
government was more laissez-faire when it comes to business regulation,
Buerkel says, �I wish that we could have stayed with the way we were
doing it, with the tips. It�s unfortunate that they had to create these
laws because other employers were ripping off their employees.�
NEXT ITEM IN Moneybox�
Why Conservatives Don't Like Obama's Fiscal Cliff Offers
Sign up for MySlate to follow all Moneybox stories.
--
Dan Clore
New book: _Weird Words: A Lovecraftian Lexicon_:
http://tinyurl.com/yd3bxkw
My collected fiction: _The Unspeakable and Others_
http://www.lulu.com/product/paperback/the-unspeakable-and-others/6124911
Lord We�rdgliffe & Necronomicon Page:
http://tinyurl.com/292yz9
News & Views for Anarchists & Activists:
http://groups.yahoo.com/group/smygo
"From the point of view of the defense of our society,
there only exists one danger -- that workers succeed in
speaking to each other about their condition and their
aspirations _without intermediaries_."
--Censor (Gianfranco Sanguinetti), _The Real Report on
the Last Chance to Save Capitalism in Italy_
http://groups.yahoo.com/group/smygo
http://www.slate.com/articles/business/small_business/2012/12/restaurant_tip_pools_how_even_co_ops_can_run_into_trouble_with_labor_law.html
Please, Do Not Tip Your Server
What happened when a worker-owned co-op restaurant ran afoul of the
Department of Labor.
By Joe Donatelli|Posted Wednesday, Dec. 19, 2012, at 9:45 AM ET
Casa Nueva is everything one would expect of an independent,
worker-owned restaurant in a funky, progressive college town like
Athens, Ohio. The walls are lined with jewelry and art for sale.
Children�s drawings are tacked above tables. Its low prices, locavore
philosophy, and good beer selection help it attract students, faculty,
and townies.
Not exactly the kind of place that would draw the attention of the
Department of Labor, right? Wrong. But because of such recent scrutiny,
diners at Casa are now greeted with more than a friendly hello from
their hosts. Everywhere customers look�on the menus, in the window, on
placards, they are reminded of Casa�s new policy, which took effect in
September: No tips. What gives?
Casa Nueva long ago settled on a system of pooling all tips from a given
pay period and dividing them equally between all employees based on how
many hours they worked that pay period. �What we truly believed in was
that everybody, from the dishwasher, the prep cook, the cooks, the
servers, provided the customer�s meal, so they should share in the
tips,� said 25-year worker-owner Nancie Buerkel.
Problem is, back in February, the Department of Labor issued �Field
Assistance Bulletin No. 2012-2,� which announced that it would enforce
regulations regarding what its spokesman Scott Allen called �the
inaccurate use of tip credit.� The Federal Labor Standards Act lets an
employer take a tip credit �toward its minimum wage obligation for
tipped employees equal to the difference between the required cash wage,
which must be at least $2.13, and the federal minimum wage,� which is
$7.25. Allen said the department in 2011 addressed very specific
information related to pay and authorized use of tips. Tip pools are
legal, but a "valid tip pool may not include employees who do not
customarily and regularly received tips, such as dishwashers, cooks,
chefs, and janitors��the very employees with whom Casa servers shared
their its tips.
Since issuing the field bulletin, the Department of Labor has cracked
down on restaurants for paying tip-earning employees less than minimum
wage while they performed non-tip-earning duties, making employees turn
tips over to management (which caused worker pay to fall below minimum
wage), and giving tips earned by tip-earning employees to
non-tip-earning employees.
Even though Casa Nueva�s tip-pooling scheme was the definition of
fairness, it did not adhere to the letter of the law. Casa could have
paid its dishwashers and cooks $7.25 an hour and nothing more, and let
servers end up much better off. Instead, as Buerkel explains, new
associates all earned less than minimum wage for their hourly rate, but
when the tip pool was added and then divided, they were paid �way more�
than minimum wage. As a result of a Department of Labor audit that
lasted several days, Casa had to change its practices.
The Department of Labor does not track how many worker-owned businesses
have been affected by the tip regulation, though it says it has
collected than $2.6 million in back wages in the last fiscal year for
more than 600 workers who did not receive the minimum wage or proper
overtime compensation.
How did a co-op get caught up in the federal government�s effort to
force restaurants to compensate employees fairly? Casa Nueva workers
believe that someone at another local restaurant advised a visiting DoL
rep to stop by Casa Nueva, where, according to 13-year worker-owner
Sheri Harvey, the rep �had never seen a business like us.�
As a co-op, Casa Nueva adheres strictly to egalitarian values.
Worker-owners have an equal vote at monthly company meetings, which are
open to Casa�s 55-60 associates. Like most socialist paradises, it�s a
bureaucratic quagmire. �We have meetings to talk about having meetings,�
said Buerkel. The member handbook is a stout 67 pages.
Allowing servers to keep tips was not considered an option. �There is a
potential for real inequality there,� said worker-owner Matthew Paul,
who has been at Casa Nueva for seven years. �We wanted to do whatever we
could to keep it equitable across the board.� And while letting
employees split tips on their own is legal, it was never considered at
Casa Nueva. �It would have been a nightmare,� Buerkel said.
Two options emerged that would allow the restaurant to follow the new
labor rules: Add a service charge at the end of the meal or raise menu
prices. That tipping is a voluntary act was not acknowledged. No matter
what, a customer�s presumed gratuity would be added to the bill.
Opinion was split evenly between both options, according to Harvey, who
supported raising prices. �I felt like (a service charge) was a double
whammy because what if the service wasn�t good and the food was wrong?
Then all of the sudden I�m like, �Twenty percent service charge!� I
didn�t like that. I would rather say, �This is what the price of our
food is.� I�m still going to give you the good service.�
When it turned out that raising prices was easier on the restaurant�s
point-of-sale computer system, the worker-owners voted unanimously (all
votes must be unanimous) to raise menu prices based on previous tip
averages and the cost of goods and labor expense.
Now, new associates still earn less than minimum wage, but the increased
revenue generated by higher prices is paid to employees as a separate
�revenue wage,� which brings their compensation back to an amount
similar to what they earned before the no-tips policy took effect.
Customers have greeted the new policy with a mix of humor, empathy,
disappointment, and more than a few comments about how The Man is coming
down on the Little Guy. A few customers have gotten creative, drawing
pictures for their servers or leaving notes of thanks. One penned a rap
song on the back of a receipt. All money left on the table is donated to
charity. In September, tips were given to community food initiatives.
(Disclosure: I eat at Casa when I�m in Athens and not tipping the
friendly wait staff and bartenders for good service feels�there�s no
better word for it�wrong.)
Asked whether the Department of Labor�s actions make her wish the
government was more laissez-faire when it comes to business regulation,
Buerkel says, �I wish that we could have stayed with the way we were
doing it, with the tips. It�s unfortunate that they had to create these
laws because other employers were ripping off their employees.�
NEXT ITEM IN Moneybox�
Why Conservatives Don't Like Obama's Fiscal Cliff Offers
Sign up for MySlate to follow all Moneybox stories.
--
Dan Clore
New book: _Weird Words: A Lovecraftian Lexicon_:
http://tinyurl.com/yd3bxkw
My collected fiction: _The Unspeakable and Others_
http://www.lulu.com/product/paperback/the-unspeakable-and-others/6124911
Lord We�rdgliffe & Necronomicon Page:
http://tinyurl.com/292yz9
News & Views for Anarchists & Activists:
http://groups.yahoo.com/group/smygo
"From the point of view of the defense of our society,
there only exists one danger -- that workers succeed in
speaking to each other about their condition and their
aspirations _without intermediaries_."
--Censor (Gianfranco Sanguinetti), _The Real Report on
the Last Chance to Save Capitalism in Italy_
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