Stick to higher wages awarded as restaurant industry warns of ‘panerification’

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GRAND RAPIDS, Mich. (WOOD) — Restaurants in Michigan will get at least a temporary reprieve following a court ruling that would more than double wages for tipped workers.

On Friday afternoon, Judge Douglas Shapiro granted a stay of 205 days on the order, giving the state more time to appeal its decision and the restaurant owners time to figure out how they could accept higher wages.

In his ruling, Shapiro said the state had failed to justify delaying wage increases, but concluded there were “justified concerns about the capacity of employers and affected state agencies.” immediately make the necessary changes.

The stay was sought after a Judgment of July 19 in which Shapiro concluded the Republican-led lame duck legislature in 2018 violated a section of the Michigan Constitution when it approved wage increases then weakened the laws by an amendment approved by a simple majority during the same session. This decision ultimately bypassed a public vote on an electoral measure.

“It was just a total and outrageous denial of democracy,” said Saru Jayaraman, president of A fair salary, who spearheaded the Vote for Higher Salaries initiative. “Minimum wage increases have never failed in any state on the ballot. People have always voted yes.

The legal battle is ongoing. If Shapiro’s decision is upheld, restaurants would be required to pay tipped workers like servers and bartenders who currently earn $3.75 an hour, the same as regular hourly workers. Wages for tipped workers would increase by about $6. They would continue to collect tips.

“This is wonderful news. It’s so important, it’s so historic. This will impact 1 million people in Michigan who will get a raise,” Jayaraman said.

Michigan Restaurant and Lodging Association President and CEO Justin Winslow said raising the minimum wage wouldn’t have much of an impact because many restaurants already pay that amount to hourly staff. But he says rising wages for tip employees overnight could force restaurants to cut staff, raise prices or close.

Wage changes were a priority for restaurateurs at an MRLA meeting this week.

“There was a lot of concern, a lot of anxiety frankly from the members. I don’t think people understand that this industry is still reeling from the pandemic,” Winslow said, pointing to rising raw material and labor costs. “It has been very difficult for restaurants to keep up. They can’t raise menu prices fast enough. A lot of people are still on the brink in this industry and this would be the kind of thing that would send them off for good.

Winslow said a member who owns multiple restaurants told him it would be an immediate $10 million hit to his business, forcing that member to close establishments.

“I don’t know if any industry is as adaptive and resilient as this…but this industry only exists with 5% profit margins in good times,” Winslow said.

Grand Rapids restaurateur Jeff Lobdell of Management of partner restaurants said like many other business owners, the July 19 ruling caught him off guard. Lobdell says the salary change could affect nearly half of its 850 employees, but it will wait to see how the deal plays out.

“We are battle tested. We had shocks sent through the system. We are resilient. We will do everything we can to serve our communities. We love our people, we love our communities. It’s just the name of the game – you get curveballs,” Lobdell said.

HOW TO OPERATE IT

Seven other states had previously adopted higher minimum wages for service workers. Michigan is the first to join their ranks in about 30 years.

At least two Grand Rapids businesses are already paying their workers above the $9.60 and $12 rates. Tami VandenBerg, co-owner of The bar meanwhile and The pyramid system bar and venue, says most employees earn between $12 and $15 an hour plus tips. She says she began raising wages during the pandemic as a form of hazard pay and to help cover lost tips when capacity restrictions were in place.

When labor shortages and inflation set in, The Meanwhile and Pyramid Scheme decided to keep wages higher. VandenBerg says it pays off in other ways.

“All positions have been filled for about a year and people are doing well,” she said.

VandenBerg has no magic recipe for covering higher labor costs.

“Business 101 is that you have to get the money from somewhere, so you either have to raise prices, or have less staff, or find the money in another pot,” she said.

She knows her point of view is not popular.

“A lot of my friends disagree with me in the industry at all, and I feel for them. But at the end of the day, it can change the lives of people in the industry…and I think it’s worth worth a try,” she said.

THE FUTURE OF CATERING

Both sides agree that full-service restaurants would feel the greatest impact from higher wages, as fast food and fast-casual restaurants typically rely on hourly workers rather than tipped servers.

Winslow said the number of full-service experiential restaurants will likely decline, so fine dining will be “a rare treat” while fast-casual dining will increase.

“Imagine a Panera-style approach to concepts or restaurants that you would never expect for this type of model,” he said. “You see that more on the West Coast, so I think you would see it more here too… panerafification.”

VanderBerg said he’s seen alternative models in Europe and California where more restaurants rely on self-service kiosks, ordering at the counter or other automated options.

But Jayaraman said states that have already eliminated the sub-minimum wage have seen their full-service restaurants explode with higher growth rates and fewer closures during the COVID-19 pandemic, even when some of those states were down. subject to stricter COVID-19 lockdown rules than Michigan.

“Restaurants are doing very well… across the country that are paying the full minimum wage,” she said.

Jayaraman said the higher wages have also had a ripple effect: better-paid workers stay longer in their current restaurant jobs and spend more, which grows the economy and ultimately pushes up the wages of workers. other workers. Jayaraman says that this was the case for Denny’swho said it had grown faster in California than any other state due to higher worker wages.

THE PANDEMIC PUSHED WAGES

Staffing shortages that began near the start of the COVID-19 pandemic are already pushing Michigan restaurants toward higher wages. Jayaraman said job postings show that more than 200 Michigan restaurants eager for hires are already offering pay rates at or above $9.60 an hour to tip employees.

“Restaurants are already doing this because they find it’s the only way to stay open,” she said. “It’s the industry’s way of surviving, of adding staff.”

“There were times when you couldn’t even get people to apply unless you paid $15 an hour plus tip,” VandenBerg said.

Winslow said restaurant servers are already doing well without salary changes. He said a 2022 report from the National Restaurant Association shows servers in Michigan are costing an average of $24 an hour with tips right now.

VandenBerg said bartenders and servers make a lot of money at fine dining restaurants, but pay varies from restaurant to restaurant. And even with higher salaries at his companies, VandenBerg said staff still struggle to find affordable housing.

“From a moral and ethical standpoint, we need to get more money for hospitality workers. With housing and inflation, it’s just too hard without more money,” she said. “I know it will be a challenge and it will be a change, but it’s essential that people earn a living and we just haven’t done that in the hospitality industry.”

AND AFTER

The reprieve granted on Friday runs until February 19, 2023, leaving time to appeal. Any other suspension must be filed with the Michigan Court of Appeals or the Michigan Supreme Court.

“I think the operators and staff like the current system and we hope it won’t change. But if so, we will cooperate,” Lobdell said.

Jayaraman thinks the matter could go all the way to the Michigan Supreme Court next year, but One Fair Wage is not awaiting a decision. Earlier this week, the organization submitted petition signatures to bring a proposed minimum wage of $15 plus tips to the ballot in 2024.

“People say we need a minimum of $15 to survive and that’s how we got the 600,000 signatures,” Jayaraman said.

“It’s going to come one way or another, so it’s better to figure it out now than wait,” VandenBerg said.

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Cecil N. Messick