Rebirth of a Restaurant: Paying Lip Service to Service Workers
On restaurant service charges, pay equity and not getting sued
I recently booked a fine dining restaurant here in LA where I ended up tipping twice…maybe? With only a handful or two of seats available per night, this restaurant was proving difficult to book and I had already missed out the month before. So when the reservations opened, I was poised at the ready with my laptop and already jittery with adrenaline. Slightly panicked, I clicked through the reservation system to find any date with a table for two. I finally found an open evening in the first few minutes after the books opened, clicked quickly after scanning a note stating that an 18% mandatory service charge is added to each bill and that this was not a tip.
Having also recently scanned an LA Times article on how hotel restaurants were being sued for allegedly not distributing service charges to their teams appropriately, when I saw a tip line appear as I checked out, my eyes widened. I wasn’t clear what the service charge was for and didn’t want the team to be short, and I also didn’t want to lose these seats, so my panic took over and I added another 20% tip. In the end, including LA’s sales tax of 9.5%, I paid 45% above the listed price of the meal. Oops. Or not. I have no idea if that’s what I was meant to do, and I’m supposedly in this industry.
The US system of tipping is baffling, infuriating and rife with uncertainty for everyone involved — from restaurant guests and employees to owners. So, after having come out of this booking experience feeling slightly defeated, and working on opening new baroo, I’ve been doing a deep dive into what we as restaurant owners are supposed to do. I’ve received legal advice, attended legal trainings, surveyed other restaurants and the growing prevalence of 18-20% mandatory service charges in LA, read the recent proliferation of articles on restaurant service charges on why restaurants have them and why guests hate them (I’m paraphrasing the articles). So if you feel like nerding out on the details of service charges versus tips, read on.
To clarify for those who haven’t spent the last month musing over service charges, (in LA at least) “tips” or “gratuities” legally are the property of employees, specifically non-managerial service employees or those who have direct interaction with guests. Your server or waiter, the bartender or host. Tips and gratuities can be shared with non-service members of the team (like cooks and dishwashers), but service employees should receive a greater share of the tips. As seems right, owners and managers cannot take any share of tips.
Mandatory service charges are the property of the employer and can be distributed more freely at the employer’s discretion. So if you want the back of house employees to take home more than under a traditional tipping model, you can give them more of a share. Or so I was advised. But you have to be careful to differentiate the service charge from a tip. And so you will see language plastered on menus, websites and receipts that says something to the effect of “This is not a tip,” which can lead to the confusion I experienced as to whether one should tip more or not. Anecdotally, it seems that most people do not tip above an 18-20% mandatory service charge.
But this area is dynamic and receiving a lot of attention, and it’s difficult to know if you’re actually doing the right thing. Last week, as reported by the LA Times, Jon & Vinny’s restaurant group in LA was hit with a class-action suit on behalf of front-of-house servers who argued that they were entitled to Jon & Vinny’s 18% service charge in full. That they shouldn’t have to share what they characterized as a tip with other non-FOH members of the team. So is this service charge a tip in the end? We will have to see what the courts say in the Jon & Vinny’s litigation, if the case ends up going to court at all.
Another quirk of mandatory service charges is that guests pay sales tax on these service charges. So some would argue that the price of a dish at a restaurant with such a service charge is, in reality, 18 or 20% higher than the listed price, and shouldn’t restaurants just be up front about their prices. There are a growing number of complaints on Yelp and among guests that prices should just be increased across the board. I have to say that, as someone who lived abroad for a long time, this argument makes sense to me. When you eat out in other countries, the cost of labor and all other operating costs are baked into the price. (But in the US, aren’t people really arguing against themselves to pay even more? Because here, if restaurants just raised their prices to cover service charges, would you then refuse to tip the standard 20% gratuity on top of that? Doubtful.)
I have to say that as restaurant owners, we’re somewhat reluctant to just adjust our prices upwards by 20%. Because it’s the menu price that people think about as they consider where to go, when they compare your restaurant to another, when they build up their expectations of your restaurant. If you just have a mandatory service charge, then you can keep your prices where you feel comfortable but still ensure there will be a supplement for employee pay that would typically be covered by a tip. But then is the service charge a tip or not? Again, sigh.
There are a lot of legal nuances that I won't go into right now, but in sum, I think this whole tipping system — from the bias towards service staff over back of house staff to the convoluted structure we need to implement to correct this imbalance — needs to go. I strongly feel that this structure betrays certain fundamental values that Kwang and I hold and want to instill in our business.
As restaurant owners, the huge disparity between typical server wages and back of house, especially cooks’, wages, makes ZERO sense to us. I have heard of multiple examples where servers could make more than their managers which also seems bizarre to me. Something is off in this system.
I do not underestimate the skill it takes to be the consummate server, handling challenging guests and kitchen delays, communicating with the right amount of effervescence but also knowing when to retreat to the side, knowing the ins and outs of each dish and drink on the menu, and everything else it takes to make the dining room function. It’s a lot and I value and appreciate all the FOH team members who have made me feel so at home, made me smile with their repartee, and who shared the restaurant’s vision through their hospitality.
Kwang and I also appreciate the literally backbreaking work of being a cook. After years in kitchens with heavy aprons hanging from his neck, Kwang has a herniated disc and he can only wear cross back aprons (like the hemp aprons we love from White Bark Workwear). Kwang’s arms are littered with scars and remnants of old kitchen burns. Working in the back of house can be harrowing and it takes great skill to work in one.
More importantly, what is a restaurant without the FOOD? What is more valuable to a restaurant? What makes a restaurant worth going to? For baroo, it has always been about the food above all else. But we also know that for the best restaurants in the world, the food and the service work together to create a memorable, and hopefully unforgettable, experience for their guests.
Everything is connected — the front and the back. It’s the symbiosis that creates pure, experiential magic. So surely, both front and back of house should be comparably compensated for their labor. It does seem to be extremely risky to try and achieve that pay equity right now.
While I would never wish any fellow human being the pain of being involved in a class-action lawsuit (from either side), if Jon & Vinny & Helen choose to litigate instead of settle, maybe this lawsuit could be the impetus for real reform of this system. Otherwise, as an industry, we need to start thinking about a new model and working through this with our legislators, along with FOH and BOH workers and managers.
Kwang and I have been working through this in real time. The Jon & Vinny’s class action and my deep dive has made us re-evaluate what we were heavily leaning towards — a mandatory 18-20% service charge. I have no answers right now. I just hope that people will understand that we are all trying to do our best within this broken system, and do the best by our team, and not just pay lip service to the needs of the team as a whole.
xx Mina
I really appreciate your grappling with the tipping issue in the US, which is problematic to begin with and is only getting increasingly confusing as you've noted. As a diner, I always do an internal cheer when a restaurant factors all the employee-benefits into the menu price and make it clear that tipping is not needed. Though I understand that the raised menu price could be initially off-putting to potential diners, I think that we, as a public, can and should be educated on how inclusive-pricing is beneficial to the industry as a whole. When I finish a meal out and the bill arrives with a lengthy list of added charges (some recent ones I've seen: service charge, COVID recovery, employee education, health insurance, mental healthcare, etc.), while I appreciate the intention, it's hard not to feel like there was a lack of up-front transparency. Plus, there's a huge disparity in tips made by waiters in high-end restaurants and those in more casual places, which doesn't necessarily reflect the amount of labor contributed. I think it makes a lot of sense when restaurants work out a pricing model that allow them to profit from rendered service and give employees livable wages and necessary benefits.