Bill Kitsilis – RI Future

March 23, 2015

Tipped minimum wage increase debated at the State House

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A large coalition to raise the tipped minimum wage was launched at the State House with a press conference and public testimony on House Bill 5364. Representative Aaron Regunberg introduced the bill that would gradually increase the the minimum wage from $2.89 to match the regular minimum wage by 2020. Senator Gayle Goldin introduced matching legislation on the Senate side. There has been no increase in the tipped minimum wage in nearly 20 years.

ROC United RI (Restaurant Opportunities Center) launched “One Fair Wage Rhode Island,” an impressive coalition of community, labor, faith business and women’s organizations that includes the Women’s Fund of Rhode Island, RI-NOW, NAACP-Providence Branch, Farm Fresh Rhode Island, the Economic Progress Institute, the Bell Street Chapel, Rhode Island AFL-CIO, the Coalition of Labor Union Women, Rhode Island Jobs with Justice, Fuerza Laboral, NEARI, United Service and Allied Workers of Rhode Island, Planned Parenthood of Southern New England and Unite Here Local 217.

Many restaurant patrons are unaware that their tip is not simply a “thank you” for great service, said Senator Goldin, “It’s paying your server’s base salary, and nobody’s base salary should entirely depend on a customer’s mood.”

More than just being an issue of fairness, this is an issue of impacting “women’s economic security,” says Women’s Fund Executive Director Jenn Steinfeld. “Nearly three in four Rhode Island tipped workers are women, one-third are mothers, and more than half of these are single mothers.” Steinfeld says that eliminating the tipped minimum wage will “help address the gender pay gap.”

Being dependent on tips for their salary makes servers more vulnerable to sexual harassment, since telling a customer that their advances or flirting is unwelcome puts the server at risk of losing a tip. A recent report from the national ROC United found that, “Women living off tips in states with a $2.13 an hour tipped minimum wage are twice as likely to experience sexually harassment than women in states that pay the full minimum wage to all workers. In fact, all workers in $2.13 states, including men, reported higher rates of sexual harassment, indicating that the sub-minimum wage perpetuates a culture of sexual harassment.” It’s in response to this atmosphere of sexual harassment that ROC United has launched its “Not on the Menu” campaign.

There is also good economic sense in raising the tipped minimum wage, maintains Mike Araujo, of ROC United RI. “”Raising the subminimum wage will have an important stimulative effect for Rhode Island. When tipped workers earn more, that money goes right back into the local economy.” ROC United estimates raising the wage will pump $64 million into the state’s economy. Further, tipped workers in Rhode Island currently receive $638,325 in food stamps every month, which means that taxpayers are effectively subsidizing the restaurant industry through social welfare programs.

After the press conference there was a heaing on Regunberg’s bill in the House Labor Committee. Though over 150 people signed up to testify, on both sides of the issue, in the end only 25 people could endure the four hour hearing waiting for their turn to speak. Those speaking against raising the tipped minimum wage were mostly members of the Rhode Island Hospitality Association (RIHA), a business lobbying group that routinely opposes any legislation that might raise the minimum wage or improve the ability of workers to collect money lost to wage theft. Many of the RIHA members wore small golden pineapple pins.

“The states that have eliminated completely their subminimum wage,” said Representative Regunberg describing the economic impact of his bill, “have as high or higher industry and job growth rates as subminimum wage states.”

Bill Kitsilis, of Angelo’s Palace Pizza sees no reason to raise the tipped minimum wage, and said, “My tipped employees… are some of the highest paid employees in my business.” He thinks $2.89 is fine, since that’s what he predicated his business model on. Comparisons with other states are not valid, Kitsilis maintains, because other states have much, much stronger economies.

Representative Antonio Giarrusso asked about employee turnover. Kitsilis feels that turnover only happens when people aren’t making money, and he also says that there are a lot of people hiring right now, making it difficult to find workers. An odd statement, considering Rhode Island’s unemployment rate.

The issue of “side work” came up, that is, the work servers do for a restaurant, at $2.89 an hour, that doesn’t earn the server tips. Side work is an old way of getting work done in a restaurant on the cheap, and is completely legal. Raising the subminimum would eliminate this disparity. Kitsilis said that such work “tends to be… a small percentage of what they do, most of the time…”

Representative Teresa Tanzi has worked in the restaurant industry for 14 years. “In those 14 years I have worked at dozens of restaurants, somewhere around 45 restaurants, I would say. And in all those restaurants, one has paid me according to the law.” For fear of retaliation, she could never confront management about this. “I’m well aware that they are breaking the law, but there is nothing I can do. I am relying on my manager and the owner of that restaurant for my employment.”

The Department of Labor surveyed 9000 restaurants over two years and found that 84 percent of them violate the law.

When Chairperson Joseph Shekarchi pushed back against Tanzi’s experience, saying that he doesn’t see the connection between low wages and harassment and abuse of servers, drawing on his experience as a bartender, Tanzi stuck to her guns and pointed out that the experience of women working as servers and men working as bartenders are very different. “It does happen and it’s a daily occurrence. If someone touches you, or if you’re waiting on a table and it’s a party of ten and that’s all the money you’re going to make tonight, and they want to be fresh with you in some way shape or form… I refer to it as a ‘golf clap’ in my vernacular. Whenever someone says something that’s ‘funny,’ you’re waiting on someone and they something that isn’t funny, you have to laugh. If someone touches you inappropriately, what are you going to say? There’s very little recourse as a server that you have.”

Rep Giarrusso’s solution for “any woman or anybody getting sexually harassed” is that “they should hit somebody with a nine iron.” Maybe he’ll introduce legislation to that effect.

“The truth is, 60 percent of restaurant workers in Rhode Island are over the age of 24 and 32 percent of all of Rhode Island’s restaurant workers are parents.”

“I feel that the current wage devalues me as an employee,” says Daniel Burke. Burke explained how the days and hours he is making good money from tips are averaged with the days and hours he’s performing other tasks at the restaurant. As long as he averages minimum wage with the money provided by customers, the restaurant can get away with paying him $2.89 an hour. Of course, Representative Giarusso thinks that Burke should take this issue up with his employer because, “I would, that’s for sure.”

As a 31 year old mother explains that her bartender job requires her to perform duties that are not directly related to serving customers. Therefore no tips can be expected and the restaurant gets away with paying employees $2.89 an hour for work that any other business in the state would have to pay at least minimum wage to accomplish. Again, Representative Giarrusso misses the point, thinking that the issue of side work isn’t related to this. As long as there is a two-tiered wage system, restaurant managers and owners will have an incentive to make workers do untipped work at the lower wage, rather than pay the server properly.

ROC United RI’s Mike Araujo finally explains that “those extra tasks,” that is side work, are “built into the job.” Side work, prep and cleaning averages out to about 3 or 4 hours a day, which is “effectively unpaid labor.” This profitable industry is built on the backs of primarily underpaid women.

Araujo may have summed up the night best when he said, “This issue speaks to how we believe society should be shaped. Do we believe that our citizens deserve equal treatment and deserve full equality, or do we believe that there is a second tier that women, increasingly, belong to?”

“Moving into a restaurant that paid over the minimum wage had such a tangible benefit…”

“When we talk about this issue we can’t escape the fact that this is a women’s issue… forcing a worker to rely on tips for any portion of their base wage significantly increases their chances of experiencing sexual harassment.”

Once again, Representative Giarrausso claims that “I don’t really understand the connection to sexual harassment… If someone’s a jackass, for lack of a better word… I mean, I don’t promote sexual harassment. I think those people should be tied up and jailed and never come out.” Giarrusso claims he “can’t draw the parallel” between low pay and sexual harassment.

But Giarrusso tips his hand as he grins and asks, “Is there an acceptable level of sexual harassment depending on how much you’re getting paid?” This is simply a variation of the line, variously ascribed to George Bernard Shaw or Winston Churchill, “We know what you are, we’re just haggling over the price.”

In response to testimony quoting FDR, Rep. Giarrusso maintains that “there is data that shows that every time minimum wage goes up, so does unemployment.” The US Department of Labor dispels that myth at the top of its page on the minimum wage. Giarrusso also brings up the specter of automation, as is done now whenever minimum wage increases are discussed. I deal with the automation argument here.

Joe Fortune, speaking below, wrote about his experience speaking before the committee on his own blog here.

Notice the pineapple pin. RIHA is in the house. This man is a CPA who specializes in hospitality. I am willing to bet he makes more than $2.89 an hour plus tips.

John Elkhay owns Ten Prime Steak & Sushi, Rick’s Roadhouse, XO Café, Luxe Burger Bar, and Harry’s Bar & Burger, as well as Veritas Catering. “Unlike the people who testified before me,” says Elkhay, “I actually live and work in Rhode Island.” I guess he wasn’t listening to the experiences of the four speakers who do live and work in Rhode Island. After telling the committee about how many employees he has and how much money they all make, he throws them under the bus, saying, “They don’t claim all their tips, by the way. That’s a sneaky little secret.”

“Don’t say that in this building,” says Representative Giarrusso, trying to make light of the comment.

Elkhay doesn’t blink. “Yeah, well, it’s the truth.”

“Who is here, in the industry, saying there is a problem?” asks Chris Tarro, owner of Siena Restaurant Group, answering “I don’t think there is a problem.”

“Don’t take my word for it,” he continues. Rather, he recommends going out to dinner and asking a server. But, “don’t ask if they want a raise, everyone would like one.”

Tarro thinks that the kind of retaliation employees face for stepping up to complain about their working conditions is somehow equivalent to the reaction of potential customers when they hear about the ways restaurants pay their employees and the ways in which many restaurants exploit their employees. “When I testified last time here,” says Tarro, “I got emails, I was on progressive blogs… there’s a penalty to us coming here.”

“I would like to give a nice big golf clap to Representative Tanzi and to anyone else who is trying to distract you from the issue at hand…” is as much as this sarcastic restaurant owner could say before being stopped by Chairperson Shekarchi, who advised not going after those who previously testified.

“I don’t want character assassination,” said Shekarchi, “It doesn’t help your cause.”

“I would suggest to you that twenty years… twenty years without a raise… I don’t think there’s anybody in this room that’s going to work for anybody for twenty years without a raise.”

Kristin Dart, speaking for Planned Parenthood, said that when women are paid more, they are better able to pay for essential medical care.”If I have to choose between food on my table and my annual health exam, I’m going to put food on the table.”

Speaking of her own experience as a server, she said that she was regularly told by her bosses that sexual harassment was “part of the job. If you want to make tips, then you have to be ‘nice’ to customers.”

Amy Barclay owns Simpatico in Jamestown. She’s worked her way up from being a server, pregnant with twins making $4500 a week to owning her own place. She says, “This isn’t a gender issue. This isn’t a Planned Parenthood issue, this is a performance issue.” Barclay says, “I was great staff. I still am.”

Barclay has 15 core employees and 60 in season. “They beg for their jobs back,” she says, “and they should.”

Having worked in California, where there is no tipped minimum wage, and now working in Providence, Avi maintains that in California the restaurant industry is booming and that people in the restaurants out there have a greater feeling of teamwork. “It should be the employers responsibility to pay their employees, and not to pass that on to the customers.”

Ray Desmarais, of 99 Restaurants, sounded like he was blaming victims for for their harassment when he said, “For anyone to be harassed in the restaurant business, shame on them for allowing it. Leave and come work for me. Cause I’m a good guy and I’ll treat you well.”

Senator Joshua Miller says, “…there hasn’t been a minimum wage bill I didn’t love, until today, until this bill.” Miller feels this bill takes “important revenue away from some of my most valued staff.” He owns three restaurants with over 80 servers. Senator Miller, like Representative Giarrusso, sees no relationship between low wages and sexual harassment.

Justin Kelley said that “it’s time to raise the wage” in Rhode Island. Business models change, says Kelley, citing out the end of slavery, child labor and the eight hour day as examples. Compared to those changes, raising the subminimum wage should be easy.

“I think it’s a human rights issue,” says this restaurant worker from Olneyville, “I don’t care if your male or female, that minimum wage needs to come up.”

Bob Bacon is the owner of Gregg’s Restaurants and the president of the Rhode Island Hospitality Association. He frequently visits the State House to testify against bills that might increase a worker’s wage or strengthen a worker’s ability to not have their wages stolen. Bacon feels that the Department of Labor is doing a terrific job enforcing labor laws, and no new laws are needed. Servers make a “self-reported” average of $12.12 an hour, says Bacon.

Sam Bell, president of the Rhode Island Progressive Democrats, explained President Obama‘s support for increasing the minimum wage and for increasing the tipped minimum wage. “Raising the full minimum wage and the tipped minimum wage will help reduce poverty among women and families as well as make progress towards closing the gender pay gap.”

“Considering a tipped minimum wage increase… would cost ten percent of our current sales.” This begs the question: Is the entire profitability of the restaurant industry dependent on paying servers subminimum wage? Do restaurant profits come solely from underpaying staff? How do restaurants remain profitable in California, where there is no tipped minimum wage?

She finishes the evening’s testimony with, “we’re seeing servers being replaced right now with technology all over the world.”

As I’ve said before: technology like that is coming no matter what we pay our employees. The questions we need to be asking in the face of new technologies are bigger than minimum wage increases, such questions go to the heart of our economic system, and whether it’s sustainable in the long term.

March 2, 2015March 3, 2015

Restaurant workers and owners wrestle over tip theft

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House Bill 5363 which attempts to curb tip theft in the service industry and give employees additional power to combat the practice, was introduced by Representative Aaron Regunberg this year. It is identical to the one introduced the last two years by Rep Chris Blazejewski with the big difference being that public awareness of the pervasiveness of tip and wage theft is growing due to some serious studies released recently (along with the efforts of the Fight for $15 movement) and the addition of a new player here in Rhode Island as Mike Araujo takes the helm of a new local branch of the Restaurant Opportunity Center, ROC United RI.

“Tip theft is a practice in which employers or managers appropriate some of the money left as tips for restaurant, hotel or other service workers,” Regunberg explained.

It primarily occurs, he said, in four different ways:

1. Employers can demand a cut of tips from workers
2. Employers can absorb automatic service fees who you might think would go to those workers that provided the service,
3. Employers can charge workers if customers use credit cards
4. Employers can include themselves in the tip pool and then take a cut of that pool.

“For me there’s a few different angles to this issue,” said Regunberg, “Besides being a workers protection issue, I really believe it’s fundamentally a consumers rights issue as well. If I am eating at a restaurant or staying at a hotel, and I leave a ten dollar tip, I assume the entire ten dollars is joined to the workers who did the work that I paid the tip for. I think that’s a reasonable assumption, one that’s shared by the vast majority of customers.”

Chris Tarro, owner of Siena Restaurant Group, sidestepped the issue as to whether or not customers are being duped when restaurants take part of a tip or the entirety of a service charge, saying, “Every employee in my facility knows, when they get hired, that I deduct the credit card fee on their gratuity only.”

Mike Araujo of ROC United RI, countered that, “To say that the credit card fee or the commission that’s paid is on the gratuity alone is kind of a misnomer. The fact is that a tip is a wage. It’s making up the difference in a wage that’s already too low, so anything that comes out of that wage is directly coming out of the pocket of that employee.”

Joey DeFrancesco, who became an Internet sensation with his video “Joey Quits” in 2011, explained one way in which the present process works against the employee actually providing the service.

“I worked at the Providence Renaissance Hotel… this is a pretty fancy place… I worked in room service and we made about $5.50 an hour, so below minimum wage. On top of that we got service charges in the hotel. Each bill going to room service got a 20 percent service charge. the customer sees that bill, assumes that’s a tip, and is not going to tip you. You’re not going to be impolite and say, ‘Actually, you know, we’re not getting that,’ you know, that’s against the rules.

“What was actually happening is the hotel was taking that 20 percent service charge and then our managers, supervisors who were making more than twice as much as us per hour, were taking half of that. So at the end of the day the servers actually conducting the work were making less than half of the tip money that customers believed they were giving to those servers.”

Joseph Fortune worked at Ruth’s Chris Steak House in downtown Providence during the entirety of it’s being open.

“If it was a booked banquet, I would still be making $2.89 an hour. The tip would look like a 20 percent tip going to the waitstaff, but really 17 percent went to the waitstaff and the other 3 percent was administrative for the managers. And pretty much, the customers never knew that… I would be fired if I told them, ‘Look, that 3 percent isn’t going to me.’”

The restaurant owners in attendance, mostly members of the Rhode Island Hospitality Association (RIHA), disagreed with the way the issue was being framed, and disagreed on the basic definition of certain terms, like service charge, gratuity and management. Kristin Gennuso, of Chez Pascal, explained why she thinks there’s a difference between a tip and a service charge.

“They are not considered to be the same thing by the IRS,” said Gennuso, “A tip is money that is left by a consumer. It is left free of will. A service charge is imposed, put on by the establishment. Sometimes you’ll see that for parties of six or more there will be a 20 percent gratuity, excuse me, service charge.”

“When you add a service charge to someone’s bill, you the consumer has to pay an 8 percent tax on that service charge. Then I take that service charge, I have to put that in as a sale… and then I can distribute it to my employees through payroll where the taxes can be taken out. So it’s consider a sale, that raises my sales liability, I have to put it into my payroll, which raises my payroll, and my worker’s compensation liability, and then I can distribute it out as I see fit because it’s an item on a check.”

“So, if it says a service charge, it’s not a tip. They’re two very different things.”

House Labor Committee vice-chair Rep Thomas Palangio pointed out that when a customer sees a service charge on a bill, they are going to assume that it’s for the server, to which Gennuso replied, “That’s a problem with the language, isn’t it?”

When Palangio pressed that people won’t tip as much, because they assume it’s taken care of in the service charge, Gennuso countered, “But it’s not the fault of the employer, however.”

Restaurant owners had other complaints as well. Chris Tarro explained that he has “140 employees, and I love my employees. I love ‘em. So when I hear the word ‘fraud,’ or ‘steal,’ or ‘take advantage,’ I get pissed off. I love my staff. When it snows and we have a bad day, I care more about them than about me. I’m getting choked up because I care about them, and I don’t know a restaurant owner that doesn’t.

“This is the industry I love, and this is one of the only thriving industries in the state, and we’re being attacked.

“This bill- I get the intent of this bill- we shouldn’t steal from our staff. I absolutely agree that this is a worthwhile goal but this bill isn’t the way to accomplish it.”

This prompted Jaimie, a restaurant worker in support of this bill, to counter, “If [Taro] really loves his employees and wants to protect them, there’s no reason there should be any opposition to this bill.”

“This legislation,” says Representative Regunberg, “is not punishing businesses. It doesn’t add an additional tax onto business owners. What it does is ensure that workers, many of whom are low wage workers relying on those tips, receive the gratuities that they worked for, and customers’ money goes where it was intended to go.”

But Chris Tarro thinks the bill does impose a cost, saying, “This bill avoids the Rhode Island Department of Labor and Training (DLT) and goes to Superior Court. We have a DLT to handle this, but the bill would move these cases to the much more costly superior court.” (Though unsurprisingly, I have never heard of a business owner who would willingly forgo Superior Court in the case of an employee caught stealing from them.)

Bill Kitsilis, an attorney as well as the owner of Angelo’s Pizza Palace, complained that “what scares me about this bill is that it’s a pro-plaintiffs bill. There’s a lot of propaganda to say it’s protecting employees, it’s tip theft and wage theft, but what this is is an administrative nightmare for especially pizza restaurants, the counter service, coffee shops, you name it.”

“This bill says that you can only share the tips in proportion to the work done by the service employees. What does that mean? On a Friday night at Angelo’s Pizza I have two people working the counter up front, two cashiers in the back answering phones but they’re not doing the same exact work. There’s one tip jar up in the front and they all share it equally. We’ve been doing it this way for thirty years without a problem.”

“What happens here, when you have a law that brings you right to Superior Court, it absconds, because you don’t go to the Department of Labor anymore, and it makes you pay if you lose, even a little bit. Trying to defend what proportionality means and sharing of tips? Who a manager really is and who a manager isn’t?”

“Put this in the hands of a plaintiffs attorney where they get to go to court and they’re entitled to attorney’s fees and triple the damages if they just win a little bit? or put a gun to an owner’s head where you’re forced to settle. No offense to any attorneys on this board.”

This prompted Rep. Joe Shekarchi, the chairman, to distance himself from the legislation, laughing, “I can assure you that none of us drafted this bill.”

Bob Bacon, head of the Rhode Island Hospitality Association and owner of Gregg’s Restaurants argued that, “A state law on this would be redundant to the federal law. The federal law is very thorough. It’s very well enforced…”

Joey DeFrancisco disagreed with Bacon’s assessment. “I thought federal law would cover [the tip theft I experienced at the Renaissance Hotel Providence], so I went to the Department of Labor… and I said, ‘This is crazy that this is going on, can you guys investigate?’ This was in 2011. They did so, they looked into the issue, they interviewed managers and workers they got back to me and said, ‘Okay, in fact, they are stealing your tips, however because they are not stealing enough of your tips that it’s putting you below minimum wage, there’s actually nothing the federal Department of Labor can do about this.”

Remember that there are many different ways in which tips may be stolen by management. So sometimes, when the fines are big enough and the case is against a high profile target, the US Department of Labor does step in. “Mario Batali was fined $5 million” for wage theft, points out Chris Tarro.

“The federal laws are simply not sufficient,” concludes DeFrancisco. “They do not cover tip theft in the forms we’re talking about, which is why so many states… have passed bills like this.”

In fact, according to Regunberg, “Rhode Island is significantly behind the eight ball on this issue. By my count there’s at least 23 other states that have state legislation banning some or all forms of tip theft, including most of our neighbors. New Hampshire, New York, Maine, Massachusetts, Vermont, etc.”

“If you pass this bill and servers cost more,” warns Chris Taro, “the people that might get hurt are the people who are already the lowest paid in the industry. The cooks. The dishwashers. The cleaning guys.

“I want my servers to make more money,” continues Tarro, “This isn’t the bill to do it. Let’s work together promoting this industry. Let’s educate the people who are breaking the law and penalize them. Let’s get together and spend more money on tourism because our state is pitiful and behind. I do more business, they make more money. Simple as that.”

But to argue that laws meant to protect low wage workers hurts the restaurant industry ignores the fact, says Mike Araujo of ROC United RI, that, “the people who serve are part of the industry.”

He said, “The average tipped worker does not make $20 an hour. We are not all high end restaurants. We are mostly Denny’s, we are mostly diner service. So to say that ‘my people do well’ or ‘I love my people’ might be true, but we have to love all the people who work in the industry.”

Bob Bacon made a counter offer that would involve no intervention from government. “…as chairman of [RIHA] last year and as a member of the board the year before, and I’ll reiterate this year again, if one of these people that says they have all these problems, if they want to come to us, I’ve offered for three years in a row to do the following: First, we’ll keep the employees name confidential. Second, we’ll meet with the employer and we’ll bring the complaint to their attention, third, we’ll work to educate that employer on the U.S. Department of Labor’s rules and regulations on the matter, and fourth, probably most important, in the event that an employer chooses to stay out of compliance with an issue, we would assist the employee in going through the appropriate channels to get the situation rectified.”

It doesn’t seem to have occurred to Bacon that the idea of an employee, going to a consortium of power players in the restaurant and service industry here in Rhode Island to make a complaint with no guarantee of legal protection of the kind granted by the government, might be seen as career suicide. The idea that wage theft can be dealt with by the very industry committing the violations is absurd.

“…the majority of the people in this industry, they object to the people who may violate [laws against wage and tip theft],” says Bacon, “Thirty-five years plus in the industry, I’ve never encountered it, but I’m not naive enough to say that it doesn’t exist. I can tell you that it doesn’t exist on the level that’s being portrayed here tonight. I can say that without any reservation.”

Back in reality, Rep Regunberg said, “In order for us to have a productive dialog and come to a solution that optimal for all parties, we first have to take as valid that this is a real issue. This is a practice that happens, and I’m by no means implying that all employers engage in tip theft, but I can almost guarantee you that if you talk with nearly any service worker, they can clarify that this is something that takes place and not as an isolated incident. This is something that can occur regularly, that places a real burden on Rhode Islanders who are working hard and are relying on tips to make ends meet.”

Mike Araujo was more pointed. “The fact is that the people who work for tips in Rhode Island use public assistance at a rate twice that of any other employee. Of the 20,000 people who work for tips in Rhode Island we’re talking about 10,000 who are on assistance. Clearly, every penny counts to these people.

“The cost of public assistance, just in food assistance to tipped workers in Rhode Island, amounts to $700,000 per month,” continues Araujo, “It’s vital that this passes. This is an issue of poverty, this is an issue of equality, and this is the right thing to do.”