Washington Lawyer - September 2016 - 20

MINIMUM WAGE A RISK FOR RESTAURANTS? With the enactment of the Fair Shot Minimum Wage Amendment Act, Washington, D.C., joined New York and California in mandating pay increases for minimumwage workers. And, like California, the restaurant industry in the District of Columbia is largely affected by the wage increases. A study released in March by the University of California, Berkeley Center for Labor Research and Education showed that 15 percent of all California workers who will benefit from the state's minimum wage increase - to $15 by 2018 - are employed within the restaurant and food service industry. Retail workers and restaurant employees in the state are the top two low-wage earners who will be affected by the increase, the study said. The Restaurant Association of Metropolitan Washington (RAMW) represents numerous restaurants throughout the District, serving as "advocate, resource and community for its members." Its political action committee's stated goal is to "promote the interests of the food service industry through . . . the support or defeat of legislative or regulatory issues that impact our industry." Andrew J. Kline, who serves as legislative counsel for the RAMW, says the association supports the District's $5 per hour tipped wage increase, calling it a "reasonable result" in comparison to the initial proposal of $7.50. "The increase, because it was moderated, will have less of an impact on the industry as a whole," says Kline. However, Kline says, some establishments may still struggle with the changes. "The overall higher minimum wage, along with the higher tipped wage, will have some effect, particularly for smaller restaurants." Michael Hassen, a partner at the California-based firm Jeffer Mangels Butler & Mitchell LLP, represents numerous restaurant owners in the state. He agrees with Kline's assertion that smaller restaurants will feel most of the impact of the wage increases, unlike higher-end establishments that are able to pass on the added costs to their customers. "People expect to pay more at these restaurants, so an additional $10 to $20 won't matter," Hassen says. 20 WASHINGTON LAWYER * SEPTEMBER 2016 * Mid-level restaurants, he says, do not have the same luxury due to high levels of competition. "A change of $10 to $20 is significant for diners. Instead, we may see managers firing staff and taking on more of the lower-level duties," he explains. "People in these positions would expect to be paid better than the person who is behind the scenes, washing dishes or bussing tables. How do you adjust the salaries for positions that are of greater importance to the restaurant?" Hasen asks. Hassen says there are two categories of lower-level restaurants: small seated eateries and mom-and-pop takeout shops. While takeout shops are less likely to be affected due to smaller staffing needs, seated establishments may experience financial challenges. "At the low end, it becomes a question of whether or not to stay in business," Hassen says. For some establishments, the answer may lie in prohibiting tips altogether. Instead, customers will pay a standard service charge. But this could prove counterproductive, taking away hard-earned tips from exceptional servers. According to Hassen, the culture of the restaurant business creates a perspective that many lawmakers miss. "People tend to think of minimum wage as what someone needs to support a family, and they address the issue in a way that ignores the impact [that raising the minimum wage has] on other people," he says. "Restaurants do not want to take advantage of people, but they have created positions that are not meant for heads of households," referring to dishwasher and busboy positions often filled by teenagers and young workers with no experience. However, the Economic Policy Institute report shows that only 2.5 percent of workers in Washington, D.C., who would benefit from a higher minimum wage are teenagers. The vast majority are adults of modest means who are working to support their households. Most of them bring in half of their family's income and roughly 20 percent of them are the sole providers for their families. For Peter Edelman, the Carmack Waterhouse Professor of Law and Public Policy at Georgetown University Law Center, the minimum wage increase is "a good thing," citing the rising costs of living in the District where rents are steadily increasing. "Large numbers of people working at the minimum wage rate are spending a huge amount of their income on rent. A higher wage is necessary in our city and what we must do," says Edelman, who chairs the D.C. Access to Justice Commission. While Hassen says he is in favor of a living wage, he points out that chefs, servers, and bartenders serve in different capacities than busboys and dishwashers. The former are more essential to the dining experience and success of the restaurant, he says. Clearly, there is no single predictor for the impact of a minimum wage increase on restaurant owners. "It really isn't something you can look at across the board," says Hassen. "Some restaurants are going to weather it better than others." FOCUSING ON IMMIGRANT WORKERS The Bureau of Labor Statistics reports that immigrant workers make up about 10 percent of the restaurant industry's total workforce. While a majority of these individuals work within the parameters of the law, federal crackdowns have exposed significant problems with unauthorized employment. The Pew Hispanic Center estimates that unauthorized workers, mostly employed as food preparers and servers, comprise about 11 percent of the restaurant industry's labor force. Not surprisingly, discussions about raising the minimum wage often include assertions that doing so would increase the employment of undocumented workers paid in cash. Allen Orr, who has over 13 years of experience in U.S. and global immigration practice, is among those who think that an increase in minimum wage may attract more undocumented people to these positions. "Employers may try to bring in undocumented workers and pay them under the table at a rate less than minimum wage," Orr says. But Orr doesn't expect this to be a real issue. "It may occur in some of the mom-and-pop shops, but these are establishments that would have hired these workers anyway. It is highly unlikely that it will become a widespread issue with E-Verify in place," he says. http://www.dcbar.org/

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