I work at a restaurant with counter service. This means that, within a few minutes of a customer’s walking through the doorway, I must ask whether or not they want to leave me a tip.
Well, technically, I have to take their order and turn over the iPad, and the iPad asks them for tips. During this part of the transaction, I usually look at the floor.
At least once a day, after I flip the tip screen, some guy asks me why he should tip when he’s barely experienced any service. Sometimes he’s genuinely confused or annoyed; sometimes, this question is relayed with a wink.
If I could, I’d tell him that tipping isn’t actually in place to reward good service, it’s an entrenched cultural custom that allows employers to cut down on labor costs, and forces servers like me to justify our value to customers who may not understand the system. During the height of the pandemic, this dynamic became especially uncomfortable when I needed to ask unmasked customers to cover up, before they’d chosen whether or not to tip.
But as frustrating as these encounters are, at the end of the day, customers aren’t the root of the problem. The root, of course, is the institution.
Over the past year, the pandemic heightened public awareness of working conditions in the service industry. As structural fragilities of the traditional model came to light, the discourse around tipping grew more critical, and some Triangle restaurant owners saw an opportunity to start chipping away at the industry’s cast-iron conventions.
Aaron Vandemark, chef-owner of Panciuto in Hillsborough, says he’s wanted to eliminate tipping for years. The pandemic gave him time to devise an alternative.
“Tipping creates this arbitrary wage with unwritten rules that are different from one restaurant and one culture to the next,” he says. “And it’s unequal pay for equal work, which is potentially a constitutional issue.”
And after COVID restrictions forced Durham’s COPA to shut down indoor dining and shift to a takeout-only model, co-owner Elizabeth Turnbull realized she could no longer rely on voluntary gratuities to fund a living wage for her employees.
“People are notoriously low tippers on takeout, and we knew without those tips we couldn’t keep our team members employed,” Turnbull says. “But we were also taking a hit on income, so to keep our kitchen staff at a living wage as well, we needed to be able to use some of that for them.”
In April 2020, Turnbull abandoned traditional tipping, and in its place, implemented an automatic 20 percent gratuity, also known as a fair wage charge. Beyond ensuring a living wage, Turnbull says, she saw the charge as a way to eliminate the skewed power dynamic that tipping creates between workers and patrons, and as a way to channel more money to back-of-house employees. Unlike tips, which tend to belong exclusively to servers, automatic gratuities belong to the employer, and can therefore be distributed among both front- and back-of-house employees.
Vandemark instituted a 4 percent service charge at Panciuto shortly before the pandemic started, funneling the charge’s revenue to kitchen staff in efforts to distribute tip money more equitably among employees. Mid-COVID, he increased the charge to 18 percent and dispensed with tipping. About a month ago, Andrea Reusing, chef-owner at Lantern in Chapel Hill, followed suit, as did Gray Brooks, Cara Stacy, and Jay Owens, who co-own Pizzeria Toro in Durham.
In Orange and Durham counties, employers that pay workers a livable wage—that is, a wage that meets or exceeds the county’s established amount of income needed for an individual to meet their basic needs without government assistance—can become Living Wage Certified.
Though there has been confusion over whether or not a restaurant can get certified if they’re achieving the living wage through tips or service fees, Carl Rist, a co-founder and board member of the Durham Living Wage Project, confirmed with the INDY that that is possible, and that this provision is what allowed COPA, Panciuto, and Lantern to become certified years ago.
But since implementing the fair wage charge, these three restaurants no longer have to rely on said sanction to remain certified, because they’re using revenue from the charge to fund a fixed living wage of at least $15, in Durham, and $15.40, in Orange County, for all hourly workers. This means that employees’ earnings no longer reflect week-to-week fluctuations in business, which can be a risky commitment for owners to make.
If they set the charge percentage too low and the hourly rate too high, they won’t be able to follow through on the wages they’ve promised, and they’ll have to shut down.
“It is a big step, and I think this is why it’s hard for restaurants to get their mind around it, because you’re committing to a wage that you’re paying,” Reusing says. “If we miscalculate, it could be very bad.”
In the United States, tipping is a relic of the post-Reconstruction era. The practice has been around for centuries and is generally thought to have been imported from European aristocratic conventions. By the 1930s, it had become standardized in the United States as a way for employers in the hospitality industry to avoid fully compensating workers—many of them formerly enslaved people and people of color—for their work, relying instead on voluntary gratuities from customers.
The tip model gained traction as business owners jumped on the opportunity to cut labor costs, and when the “tip credit” was introduced in 1966—a provision under the Fair Labor Standards Act (FLSA) allowing employers to pay tipped workers half the minimum wage, so long as tips made up the other half—the practice became firmly ingrained in the American restaurant model. In 1996, the FLSA was modified so that the minimum wage for tipped workers would no longer increase alongside the federal minimum wage.
While most European restaurants have shifted to a tip-less model that builds labor costs into the menu or tacks a small, mandatory service charge onto the bill, in the United States, the tipping wage floor has been stuck at $2.13 for more than a decade, and it doesn’t seem to be rising anytime soon. This, for many restaurant owners, is what makes the tip credit too lucrative not to take.
Although modern tipping isn’t as overtly discriminatory as it was in the 30s, it quietly perpetuates the culture that birthed it. Mounds of research demonstrate that people with lighter skin who are able-bodied and conventionally attractive are tipped more generously. While biting my tongue around unmasked customers was unpleasant, it was something I controlled; for servers who aren’t young and white, there may be little to nothing they can do to ensure a tip, given some customers’ implicit biases.
And while pooling tips can help correct for this sort of discrimination, that practice doesn’t change the sexualized culture that encourages servers, more than 60 percent of whom are women, to objectify themselves. Tip pooling also doesn’t resolve the larger pay disparity that tipping creates between front- and back-of-house workers. Historically, the FLSA has prohibited kitchen staff from participating in tip pools.
This is a worker protection under the tip credit law; to ensure servers make enough tips to achieve the minimum wage, back-of-house isn’t allowed a piece of the pie.
But because tips can enable servers to make more than the minimum wage, the law has resulted in front-of-house workers, who are usually white, consistently earning more than kitchen staff, who are more often people of color.
A 2018 amendment to the FLSA now allows restaurants that don’t take the tip credit to include back-of-house employees in tip pools, but this practice was prohibited for so long that many owners aren’t interested in reworking their models to accommodate it. For restaurateurs hoping to pay employees more equitably, pooling tips across all hourly employees can be a good start; at the restaurant where I work, tips are split evenly among servers and kitchen staff, which levels the playing field.
But for those hoping to move away from tipping altogether, the amendment is a band-aid on a bullet hole.
Customer backlash has not made changes any easier. While there was a movement during COVID to support restaurant workers, once lockdowns eased and restaurants were challenged in attracting workers back, public sentiment seemed to shift. When Pizzeria Toro announced, for instance, that they had implemented a Fair Wage charge, dozens of people pushed back on Facebook, writing that they would take their business elsewhere.
“We won’t be supporting you. I leave a gratuity based on the service not politics,” commenter David Brown wrote, while Mike Nowak commented, “20% living wage fee? Hahah yeah eat it yourself. You chose to be a server so earn your tip, don’t force customers to tip when sometimes the server deserves nothing.”
At Lantern, Andrea Reusing says it’s too soon to know if she’s landed on the right numbers, but she’s open to tweaking the model as needed. Vandemark agrees that only time will tell.
“The question that we’ll all have to figure out long term is, say you get 12 months in and a thousand dollars extra came in above wages that you distributed,” Vandemark says. “What is that thousand bucks?”
Excess revenue could potentially be saved to pad paychecks during slower months, Vandemark says, but if he’s consistently making more money than he’s paying people, he’ll increase wages.
At Pizzeria Toro, the fair wage charge works a little bit differently. Revenue from the charge is put into its own pot and distributed on a weekly basis, like a traditional tip pool. Both front- and back-of-house workers receive a cut of the charge, which varies, depending on position. Kitchen staff are paid a higher base rate but get a smaller cut of the charge, and the front-of-house receives a lower rate and a larger cut.
While Toro’s wages are being distributed more equitably, they’re still bound to fluctuate, because the owners aren’t using the charge to fund a guaranteed living wage. This could suggest that Toro hasn’t been quite as steadfast in its shift away from tipping, but Brooks says the unfixed rate leaves room to grow.
“As we continue to get busier, that 20 percent that goes entirely to staff will grow as well,” Brooks says. “If we simply raised our prices and gave everyone raises, they wouldn’t see their pay increase as our business increased.”
Jason Calixto, a part-time bartender and manager at Toro, says he and his co-workers generally approve of the new model, though it does seem a bit “murky.”
“It honestly feels as if the owners are having to pay less out of pocket, and getting to rely more on the fee that they’re charging,” Calixto says.
Calixto’s sentiment echoes a question many people seem to be asking: Why not just eliminate service charges, increase menu prices, and pay your staff a living wage?
Brooks says this feels like a “Bizarro World argument.”
“I don’t have the greatest business acumen in the world, but I know the basics are that you have a revenue stream, and you pay your costs with that,” he says. “So this weird idea of, ‘why should customers have to pay for your wages,’ it’s like, well, customers pay for everything.”
But when I ask Brooks if he fears raising menu prices would scare people away, he says yes.
Turnbull, Reusing, and Vandemark all say the same thing: even though customers would ultimately be paying the same total cost with higher menu prices as they would with lower prices plus a tip, it’s too hard for them to stomach the price without the smoke and mirrors of the service fee.
“It’s kind of like Three-card Monte,” Reusing says. “It’s all about what you’re calling it.”
By basing its model on worker exploitation, the industry has left customers with such a warped perception of labor costs that restaurants looking to topple the system are quickly outpriced by competitors, losing too much business to stay afloat. It’s capitalism at its finest.
At least one Durham restaurant has weathered the shift to a model without service charges. In May, Monuts Donuts raised its menu prices by 18%, eliminated all service fees, and committed to paying employees a fixed living wage. So far, it’s working.
For more expensive restaurants like COPA and Panciuto, though, where increased menu costs might be more off-putting to customers, owners see the fair wage charge as the rational first step toward reshaping industry standards.
“We have not been taught by our culture to understand the price breakdown and think about the labor,” Turnbull says. “If you see a $20 sandwich on the menu, you’re going to be like, what is going on. But when you see it as a living wage fee, it puts it in perspective, and I have found that our guests are tremendously generous about it.”
As Aaron Vandermark sees it, there is no turning back.
“The origins are disgusting, and the modernization of tipping today still has all these problems,” Vandemark says. “For me it was either you’re going to be a part of this system, or you’re gonna blow it up.”
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