July 23, 2018
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Moody’s Diner owner: New tip law drives up prices, will end charity and worker benefits

By Darren Fishell, BDN Staff
Updated:

PORTLAND, Maine — Moody’s Diner owner Dan Beck plans to close his family’s iconic Route 1 restaurant Wednesday to join a fight at the State House over moving restaurant servers to the same minimum wage as other hourly workers.

Beck on Sunday announced the restaurant would close for a day to allow staff to join a heated fight over a part of the 2016 voter-approved minimum wage increase that critics, including Gov. Paul LePage, argue voters did not adequately understand.

The citizen-initiated ballot question incrementally raises the minimum wage to $12 an hour by 2020. But it also incrementally eliminates a lower hourly wage for tipped workers, which has infuriated some restaurant owners and employees.

Lawmakers are considering three bills designed to restore the system in which employers pay tipped workers less than the minimum, with tips making up the difference.

Before Jan. 1, that base wage was set at $3.75, or half of the state minimum of $7.50. As of Jan. 1, that base wage for tipped workers is $5 and is set to rise $1 each year until reaching $12 in 2024.

Under state law, tipped workers are still owed the full minimum wage, but employers can count tips toward the difference. In other words, a restaurant server who gets $4 in tips during an hour of work will make the $9 minimum, with $5 coming directly from the employer.

As that compensation system changes, Beck and other restaurateurs argue they’re going to have to raise prices or make other changes that he wrote are not sustainable.

“Ultimately, this can spell the end of Moody’s Diner and many other privately owned, ‘Mom & Pop’ full service restaurants in Maine,” Beck wrote.

And there will be other consequences, he wrote, including full-time employees losing vacation and health care benefits.

“Donations made to the community, schools, booster clubs, silent auctions, spaghetti dinners, etc. will cease,” Beck wrote.

Analysis by the Maine Department of Labor found that, based on 2015 figures, about two-thirds of jobs that paid less than $9 an hour were in leisure, hospitality and retail trade.

“Leisure and hospitality is mostly restaurants and pubs, but also includes lodging places, gambling and other recreation industries,” Glenn Mills, chief economist for the labor department’s Center for Workforce Research and Information, wrote in January.

A Bangor Daily News analysis of federal employer data found that servers, combined servers and food preparation workers, and food preparation workers were the fourth, fifth and sixth largest groups of workers with starting hourly wages estimated below $9 in 2015.

[ Some Mainers will see paychecks bumped up after Saturday]

Beck wrote that he expects the restaurant’s payroll costs will rise somewhere in the range of $30,000 to $40,000 a year. He added that the restaurant could eventually eliminate tipping to help moderate menu price increases.

The post prompted support and criticism from other parts of the state. Portland restaurant owner Colleen Kelley expressed support for Beck and Moody’s.

“Well said and don’t let the negative comment sway you,” Kelley wrote. “I’m going through the same thing.”

Restaurant employees who fought the issue before the November election have organized around the legislative efforts, too.

[ Restaurant owners, workers organizing in Bangor, Portland against wage increase]

Lawmakers on Wednesday will hold hearings on bills that would reinstate the tip credit — the amount employers can count toward an employee’s wages — at half the state minimum wage. A tip credit of that amount would make the current base wage $4.50, a 50-cent drop.

An alternate version of that bill would require tipped workers get at least at the current base wage of $5 an hour. Another bill would have lawmakers hold off on changes, setting up a commission to study the issue.

Beck said he plans to testify against that proposal, which he called “a distraction.”

 


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