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Palo Alto proposes to exempt tipped workers from minimum wage

Written by Kaya van der Horst

In a board meeting on Jan. 10, the Palo Alto City Council voted to advocate for a new policy proposal that would permit cities to exempt tipped workers from the minimum wage requirement. However, under California state law, it is currently illegal for cities to distinguish between tipped and non-tipped workers. California is one of seven states in the United States that requires employers to pay tipped employees the full state minimum wage of $10.50 per hour before tips. Employers are therefore not permitted to include tip as part of the wage, also known as tip credit.

According to Palo Alto City Council Member Greg Tanaka, one supporting argument for the law was the focus on protection of businesses. “If you increase the cost of the workers too much, the restaurant is going to go bankrupt,” he said. “So, the rationale is if you mandate minimum wage or high minimum wage for the front-of-house workers, you might have a lot of destruction within the businesses.”

In restaurants, “front of the house” (FOH)  workers are considered to be servers, bussers and bartenders while “back of the house” (BOH) workers are chefs, cooks and dishwashers.

According to work experience teacher Meri Gyves, only FOH staff are allowed to partake in the tip pool following the chain command. “The tips must be distributed in a fair and reasonable manner, with the largest portion going to the server, then the busser and then the bartender,” she said. “Around 80 percent goes to the wait staff, 15 percent to the bussers and five percent to bartenders; it’s usually a case-by-case scenario.”

According to Tanaka, the FOH staff receive their main source of income primarily through tips. “The front of house actually gets paid quite a bit way above minimum wage thanks to tips,” he said.

The minimum wage in Palo Alto is currently set at $12.00 per hour—a higher wage than California’s minimum of $10.50. Palo Alto will increase its minimum wage to $13.50 per hour on Jan. 1, 2018 and $15 per hour on Jan. 1, 2019. According to the City of Palo Alto, the city intends to adjust the minimum wage based on the Bay Area Consumer Index each first day of the year starting in 2019.

Tanaka expressed concerns about a rise of unemployment with the rise of minimum wage. “The reason that typically happens is because when you raise the cost of labor, the businesses have to justify it some way which is often through losing jobs,” he said.

However, the demanding financial costs of life in the Bay Area are quick to drain one’s wallet and an increase in minimum wage would gather more income. According to areavibes.com, the cost of living in Palo Alto is 64 percent higher than the California average and 122 percent higher than the national one. “It’s important to support those employees that are working  in the area of customer service related businesses,” Gyves said. “Many service related employees, as well as others travel over an hour to work here and it’s these very people that make our experiences, dining or otherwise enjoyable. We need to support the sacrifices of time and effort they make to work here.

According to Gyves, around 150 to 200 Gunn students currently have a job, most of them in the retail-restaurant area. Among them is junior Anthony Cornelio who works as a barista at Starbucks. Cornelio makes $13 per hour, works at least 12 hours a week and only receives a small portion of his income in tips. “Usually the average I get is around $10 in general tips for the week for the three days I work,” he said. Cornelio originally took the job seven months ago to earn some extra cash on the side. “My parents wanted me to become a little more independent and stopped giving me money for stuff so now I have to pay for my own gas for the car,” he said.

The city’s proposal is currently still in its primitive stages and will be subject to further discussion in future board meetings.

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