Editorial: An imperfect wage increase

Palo Alto set to adopt quicker increase to $15, but restaurants protest inequities

There is no suspense about whether the Palo Alto City Council will approve a more expedited increase in the local minimum wage to $15 an hour when it meets Monday night, only how fast we want to reach that level.

After adopting a more conservative approach a year ago, the rising cost of housing and actions by other cities have made a $15 target a forgone conclusion. The only question is how quickly the increases from the current $11 minimum wage will take place and whether any exceptions should be adopted for teen workers, nonprofits and restaurants.

The proposal to be considered Monday, recommended by the council's four-person Policy and Services Committee, would raise the minimum wage to $12 in 2017, to $13.50 in 2018 and to $15 in 2019, and contains no exemptions.

That step-up schedule is the plan endorsed by the Cities Association of Santa Clara County, which adopted its recommendations in June to help achieve as much regional consistency as possible. But some cities, including Mountain View and Sunnyvale, have already opted for a quicker timeline, and there will be an effort made Monday to accelerate the increases so that the $15 level is reached earlier, in 2018.

We support the 2018 date, but to a great extent in Palo Alto this is a symbolic exercise. The competition for employees has long ago required even smaller Palo Alto employers to pay in excess of minimum wage, so the number of employers or employees that will be impacted is expected to be quite small. That accounts for how little opposition to the increase has surfaced, with the notable exception of restaurant owners.

The new wage requirements will likely have an undesirable impact in the restaurant industry, where it will primarily help the already very well-compensated wait-staff rather than the lowest-paid kitchen workers. This is because California is one of only a few states in the country that prohibits tip-sharing, meaning that tips cannot legally be pooled and distributed among wait-staff and kitchen and other workers. The entire tip a customer leaves at a California restaurant must go to the server or others who have interaction with the customer.

The typical restaurant pays its wait-staff minimum wage, because tips generally double or triple the effective hourly pay. So any increase to the minimum wage will bump up waiters' base pay and, according to restaurant owners, will soak up dollars that could otherwise go to increase kitchen wages.

Whether that is a likely outcome is difficult to judge, but restaurateurs have made a strong case that without the ability to create tip-sharing systems, the minimum-wage increase will disproportionately benefit the wrong workers.

To remedy this, the restaurants are proposing that tipped workers be specifically exempted from the minimum-wage increase as long as their total pay is in excess of the minimum wage.

While this is a reasonable approach, we agree with the council's policy committee that this is a fix that needs to take place with state legislation, not through special exceptions granted by individual cities.

Many cities have already confronted this issue and have decided that to attempt an end-around of the current state law would invite a legal challenge that would be costly and difficult to defend. It would be irresponsible for Palo Alto to become the one city that adopts such an exemption and then winds up needing to defend the practice in a long and expensive legal battle.

The place for restaurants and their trade association to get relief from California's odd prohibition on tip-sharing is in Sacramento, and the Palo Alto City Council should adopt a resolution supporting a repeal of that provision in the law and encourage other cities to do likewise. Restaurants should be able to establish tip-pooling practices that allow for the "back of the house" employees to benefit from tips.

And while we share the concerns about the impact of increasing the minimum wage on teens seeking summer or after-school jobs and nonprofits, we agree that the best approach is one that is simple to understand and simple to enforce. With no significant opposition having emerged from employers concerned about these sub-groups, it is best to not grant any exceptions. Like the tip-sharing issue, other possible exceptions should be established on a statewide, not local, basis.

As for the timing of the incremental increases and the date set to achieve the $15 minimum wage, we support the earlier, mid-2018 date. The local employment and housing markets have pretty much already pushed even low-paid worker wages above the minimum-wage level. Palo Alto should join its neighbors in Mountain View and Sunnyvale in acknowledging that even a wage floor of $15 an hour is hardly a livable wage in our communities, and by mid-2018 this will be even more the case.


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2 people like this
Posted by Chris
a resident of University South
on Sep 23, 2016 at 10:34 am

All restaurants have to do is add the service charge to the bill.

They can explain the reason to customers. If they can convince customers to eat their food, they should be able to explain their bill.

I don't have much sympathy for restaurants. They have had a long time to prepare for this and have 2 more years before $15 arrives.

5 people like this
Posted by Native to the BAY
a resident of Old Palo Alto
on Sep 23, 2016 at 11:27 am

Native to the BAY is a registered user.

How anyone can consider keeping teens from earning a city-mandated minimum wage is beyond reason. Most teens who do work part-time jobs, are doing so because they are from lower-income families and are attempting to offset the extraordinary cost of living here. As well, they are saving for college or helping pay for sports or other activities that their single parent households can’t afford. These jobs help shape their adult lives. Finally. Why would a retailer hire anyone but a teen at substandard wages? That means, lower expectation including an untrained workforce. That is not a path the City should consider by a long shot. I mean, really folks! When was the last time anyone posting here worked for minimum wage?

As for local restaurant employees. When I waited tables, all tips were shared with the bussers and dishwashers! So not paying wait staff minimum wage is ridiculous to consider. As well, wait staff may get a discounted price on one shift meal and at an already ridiculously expensive price, and most likely eat that meal standing up. That's it. Some retail minimum wage earners get store perks like paid legal holidays or 20-40 percent off of the merchandise - which is totally reasonable.

That said - places like Good Will on East Meadow pay minimum and sub minimum wage to a mostly Hispanic merchandisers and sorters. Most, if not all of their employees live as far away as Los Banos and Stockton. Yet shockingly, their employees cannot purchase at the very store they work so hard at. How sustainable is this??? Please don't bring up the countywide scandal of 20 years ago. That was a was an unbelievably embedded CEO top-down crime. There are very creative and simple ways to allow workers to economically participate in what they do for a living and without the threat of stealing! Including having 30 cameras in every store, monitored every minutes of the day. The common worker should not be paying the price for something they had not part in creating. Nor does GW accept SNAP/EBT and they sell groceries!

Givng employees incentives to work there is totally reasonable. It increases daily sales and boosts the local economy. It’s a long-term community investment. Besides it makes good sustainable sense and most of all its the decent thing to do.
shop at the place work is more than fair is not only an economic investiment, it's sustainable and the decent thing to do.

3 people like this
Posted by Susie
a resident of College Terrace
on Sep 23, 2016 at 12:27 pm

Your editorial fails to mention that the City Council decided to exempt unions from the minimum wage. (See 4.62.050 Web Link) If the minimum wage is a good idea, why isn't it a good idea for unionized workers too? This will allow the union bosses to go to hotel owners and say, "Hey, if you want to continue paying low wages to your housekeepers, just let us unionize them, and you can ignore that minimum wage law." I'd like to hear somebody on council explain why they went for the union exception. And why doesn't the Weekly bring it up? Are union workers undeserving of the same legal protections everyone else has? Where's the justice in that?

Like this comment
Posted by Dean
a resident of another community
on Sep 23, 2016 at 1:48 pm

I often eat in Palo Alto, and when I do, I provide a tip to the server, based upon the service as provided to me. I am not against the server willingly sharing the tip with the restaurant staff, but I am against compulsory sharing. The tip is based on the service, and not on any other thing.

There are some restaurants where I do not like one or more servers, so why should my tip to a server whom I like, go, even partially, to a server I don't like. I understand the tip sharing with the kitchen staff, where they work in situations that are not always very good, but still send the best products to the customers. I have seen some restaurants that put a tip jar "For the Kitchen", and I generally donate to them.

I have a problem with the rising minimum wage, in that I am on a fixed income, which except for SSI have no COLA, and that is purely tokenism. The last time I received that tokenism was about 3 years ago, and if I remember correctly it came to about $20.00 per month. Minimum wage hikes just push me further into the hole, and soon I won't be able to provide tips, because I simply do not have enough, and will be forced to go to the fast food places which don't have a vehicle for tips.

2 people like this
Posted by Mark
a resident of Stanford
on Sep 23, 2016 at 3:43 pm

Tip Pooling is permitted in California per these two cases:

In Etheridge v. Reins International California, Inc. (2009) 171 Cal.App.4th 908, Defendant Reins operated several restaurants in California. Etheridge and other servers brought a complaint on behalf of a class of servers employed by Reins. The plaintiffs challenged the legality of Reins’ mandatory tip-pooling arrangement which required servers, as a condition of their employment, to share tips with certain other employees at the restaurant, including those who do not provide “direct table service.” The Court of Appeal affirmed the lower court’s ruling that even those employees who do not provide direct table service may share in tip pools so long as they are not managers or supervisors.

A California Court of Appeal overturned a recent trial court verdict awarding a class of current and former Starbucks baristas $86 million in tips they were required to share with shift supervisors. The Court of Appeal held in Chau v. Starbucks (2009) 174 Cal.App.4th 688 that the trial court erred in ruling that Starbucks’ tip allocation policy violated California law. Each customer at the stores was served by a customer service team, rather than by an individual employee. The team consisted of one or more entry-level employees and one or more shift supervisors, who rotated jobs throughout the day and spent more of their time performing the same service tasks. The money in the collective tip box was divided among the entry-level employees and the shift supervisors. The court explained: “The applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes.

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