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As of September 1, 2012 the worker-owners of Casa Nueva Restaurant and Cantina initiated a new practice of not accepting tips from customers. Many food and beverage establishments across the United States have a no-tipping policy. For some, this is an easier way for the food and beverage operators to price their menus and services and still pay a decent living wage to everyone on their staff.
Recent changes to the U.S. Department of Labor’s Fair Labor Standards Act (FLSA) regarding tipped employees has encouraged many businesses to adopt a no-tipping policy. To be in compliance with the FLSA we have created new prices that cover both the menu item and the service. Raising our prices and no longer accepting tips is the only solution we saw to adhere to our values and be in FLSA compliance.
The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector as well as employees in federal, state, and local governments. A 2011 FLSA rule amending tip credit regulations specifically sets out the U.S. Department of Labor Wage and Hour Division’s interpretation of the Act’s limitations on an employer’s use of its employees’ tips: Tips are the property of the employee whether or not the employer has taken a tip credit…[tips cannot be shared with other employees or distributed through payroll.]
From 1985-2012 we had pooled all of our tips every pay period and then shared them with everyone working on shift in the front or back of the house. The current interpretation of the FLSA does not allow us to be in compliance and continue what we believed were the most equitable and cooperative practices of sharing tip income.
As far as we know, no one on our staff filed a complaint, since all employees were made aware of our tip pooling practices before they were hired. We were one of the first three restaurant establishments in Athens to be investigated in 2012. Since the investigation began that summer, a number of other Athens establishments were also under investigation. It appears that this was all part of the enforcement of the new tip credit regulations. A February 29, 2012 Memorandum from the U.S. Department of Labor Wage and Hour Division directs regional administrators and district directors to enforce the new 2011 ruling uniformly across the country.
Under the old system, all the tips we received were divided equally among us for the pay period. Many of us work multiple positions: we might wait tables one day, bartend another, chop veggies or work in one of the kitchens on another day. We liked this system because no matter what position we worked during the pay period, we were paid the same.
Throughout the investigation process our worker-ownership values and non-traditional labor practices were acknowledged as a unique model of fairness and pay equity, but unfortunately they did not meet the letter of the law. The price inclusive approach allows us to remain true to our founding principles and assure compliance.
To be in compliance with the FLSA we created new prices that cover both the menu item and the service. Many of the price increases were subtle, based on the previous tip averages and our cost of goods and labor expense. Maybe you experienced some pricing shock, but remember that this price includes our cost of service to you and you can no longer leave a tip.
Actually, it turns out that tips and quality of service are usually very loosely correlated, at most (see “Tip Levels and Service: An Update, Extension and Reconciliation” by Michael Lynn of Cornell University, 2003, and “Incentives and Service Quality in the Restaurant Industry: The Tipping Service Puzzle“, by Ofer H. Azar of Ben-Gurion University, 2007). People generally just tip what they tip. It’s a pretty unusual occasion where quality of service affects the amount of the tip much, and as a result it’s even rarer when a prospective tip affects the quality of service.
Interestingly, however, female servers drawing smiley faces on the check has been shown to increase tips by 18% (Rind & Bordia 1996). Hey, there’s a whole field of study as to how servers can increase their tips by doing such things as touching guests on the shoulder, or predicting that the next day’s weather will be sunny. Check out Mega Tips from Cornell University.
More and more restaurants are changing the way they pay for providing service. Some have a price-inclusive menu, like Casa, while other charge a service fee in lieu of accepting tips. A short list includes the North Star Cafe in Columbus, Black Star Co-op in Austin, Texas; The Linkery in San Diego; and Yuka in New York City. Chez Panisse is an example of a fine-dining establishment that has been a no-tipping restaurant for many years.
If you forget and leave cash on the table or bar, Casa will donate the money directly to a local charity of our choice. We chose a different charity each month. If you forget and try to add a tip on your credit or debit card, you will notice when you check your credit card statement that we did not add that amount to your total. Your waitron or bartender will also remind you that we no longer take tips as they bring you your check.
With the new pricing, our customers’ total out of pocket expense has most likely remained about the same. If you accidently forget and leave cash on the table or bar, and we are not able to directly return this to you, Casa will donate the money directly to a local charity of our choice.
Since our formation, Casa has valued everyone’s role in bringing you the best Casa experience. As a cooperative business, we do not want to favor one person’s role over another, but rather pay a fair wage to everyone whether they are waiting, tending bar, cooking, or doing dishes. We value versatility and job rotation. Each employee may perform many different jobs that contribute to the success of our business.
Since our formation, Casa has valued everyone’s role in bringing you the best Casa experience. As a cooperative business, we do not want to favor one person’s role over another, but pay a fair wage to everyone no matter if they are waiting, tending bar, cooking, or doing dishes. Since we prepare as much local food as possible in-house, there are a lot of workers who have a role in delivering a great experience. We value versatility and job rotation. Our staff work many different types of shifts that contribute to the success of our business.
There are several interesting articles on-line about this subject:
- A New York Times Sunday Magazine article about the Linkery, in San Diego.
- This installment of Ask a Waiter provides a though-provoking analysis of the tipping practice.
- The New York Times provides a pretty accurate overview of the state of tipping.
- Here’s an article from the Chicago Tribune explaining why eliminating tipping won’t work at restaurants such as ours, even though “the idea has merit.”
- Finally, a blogger’s well-written reaction to the Chicago Tribune article above.