Calculating the tip at the end of a meal is as ingrained into our dining experience as the complimentary breadbasket or a glass of ice water. Although a perennial headache for the mathematically challenged, the practice of tipping wait staff after a meal is firmly entrenched in the United States. Tipping policies are advantageous to restaurateurs as well, who are free to pay their front room staff an hourly rate far less than minimum wage (the federal rate stands at just over $2.00 per hour). The recent spate of minimum wage hikes, however, appears to be having an effect on this calculus. As the New York Times recently reported,[i] some restaurant owners are considering doing away with (or have already done away with) the time-honored tipping system in lieu of a flat rate for their food offerings. Such a system works by increasing food prices by an amount commensurate with the expected gratuity and refusing (or discouraging) tips. An example of the well-known law of unintended consequences, the minimum wage hikes—which in Maryland are scheduled to take effect again in July of 2016, July of 2017, and July of 2018—are causing restaurateurs to consider alternate wage payment strategies. Although billed as a way to level the playing field for front- and back-end staff (kitchen workers, who typically do not receive tips, are routinely paid far less than those who receive tips), the change has the additional advantage of removing the administrative confusion surrounding proper compensation policies for tipped employees. If you are considering reexamining your eatery’s compensation rules, or are interested in learning more about the benefits of varying wage and hour models, contact the attorneys in Offit Kurman’s Labor & Employment Group. We would be more than happy to help you. [i] Patricia Cohen, Restaurants Say No to Tips, Yes to Higher Prices, N.Y. TImes, Aug. 24, 2015, at A1.
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