Restaurants Canada’s new Restaurant Realities campaign exists in an alternate reality

By Kristy Koehler, February 15 2019 —

A worrying trend is emerging towards politicians advocating for a tiered minimum wage system — specifically, a minimum wage that is lower for workers who serve liquor. Last year, Stephen Mandel of the Alberta Party advocated for the practice. And just this week, United Conservative Party leader Jason Kenney said it was something his party would look into if elected.

At the UCP leadership debate in September 2017, Kenney stated that he would not run on a platform of cutting peoples’ wages. But even then, he made mention that it may be prudent to be “creative” with the minimum wage, specifically mentioning those who earn tips. In the same debate, he also stated that he had “listened to employers including Restaurants Canada and the Chambers of Commerce who’ve told [him] they don’t think it’s realistic for a government or party to run on a platform to lower wages.” Clearly, for Kenney and the UCP, as well as for Restaurants Canada, servers and bartenders are nothing more than pawns in a political campaign.

This week’s statement from Kenney came at the launch event for Restaurant Realities, a campaign by Restaurants Canada to raise awareness of the struggles currently being faced in the restaurant industry. Restaurants Canada calls itself “the voice of food service.” I’ve spent my entire life in the restaurant industry and the organization certainly does not speak for me. As a career bartender, I have stayed silent for too long while organizations like this spread misinformation.

Restaurants Canada regional vice-president Mark von Schellwitz recently published an op-ed in the Calgary Herald decrying the elimination of the liquor-service wage. Von Schellwitz is nothing more than a lobbyist for business owners. He has opposed minimum wage increases for years at the expense of restaurant workers. His opinions, and those of his organization, are out of touch with the way the industry actually operates. The misinformation he is spreading is not only wrong, but harmful to restaurant workers and the businesses he aims to help.

A lower wage for liquor service staff is problematic from a business standpoint. It is essentially a wage that is subsidized by the consumer. Making the consumer responsible for the wage of the worker creates an environment in which the server is beholden to the customer, rather than the business. As a business owner, isn’t it better to create an environment where employees are loyal to your specific business?

I have been told by customers literally hundreds of times over the course of my career, “We pay your wage.” This fosters a relationship of indentured servitude between server and customer. Servers feel the need to put up with bad customer behaviour on account of this. Add in that most of the servers employed in restaurants are women, and this fosters an environment of sexual harassment that servers feel must be endured in order to keep making money.

It also leads to servers working for their tips instead of for the business. In this situation, a server is more likely to offer a drink without ringing it in or provide some other free item in order to rectify a situation, make the customer happy and thus earn the tip, not considering that this is bad for the bottom line of the business owner.

The Restaurant Realities website has posted a number of policy recommendations on their website in addition to fancy infographics laden with statistics designed to confuse and stoke fear. Many of these policy recommendations are not grounded in any kind of reality, let alone restaurant reality.

Minimum wage increases don’t directly correlate to meal cost increases

The first recommendation is in regard to minimum wage. It states that “Alberta’s minimum wage increase to $15 per hour on Oct. 1, 2018 represented an escalation of nearly 50 per cent (63 per cent for liquor servers) over the past four years. […] Offsetting labour cost increases typically means cutting staff or raising menu prices — neither being viable solutions for most small businesses.”

Describing the wage increase as a hike of 63 per cent leads people to erroneously believe that the cost of their meals will rise the same amount. This is simply not the case. Using a few of the restaurants I have worked in as an example, let’s examine the math.

On an average night, a restaurant might take in $3,000 in sales and have two servers, a bartender and a hostess on shift. The servers work an average of five hours each, as does the bartender, while the hostess works a three-hour shift.

This represents 18 hours of staff labour at $15 per hour for a total of $270 in labour.

Implementing a liquor-service wage that is reduced by $2 per hour — which is more than the differential in other provinces with tiered minimum wage systems — would result in a total labour cost of $240, a difference of $30, or one per cent of total sales.

To account for this one-per-cent increase in cost relative to total sales, meal prices must also rise by one per cent. The average cost of a meal in the above example is $30, so this one-per-cent increase amounts to your meal costing 30 cents more than it did previously.

Those who ignore this basic math and cite increases in costs all along the supply chain as a reason for costs rising even higher should remember two things. Firstly, farm labour from family members is exempt from minimum wage laws. Secondly, truck drivers for major food service operations like Sysco and GFS have long earned more than minimum wage.

Servers don’t receive their entire tips

The same policy recommendation also says that the liquor-serving wage should be adopted, “recognizing the significant gratuities earned by servers.” What the average consumer does not know — and what Restaurants Canada feigns ignorance of — is that servers tip-out a percentage of their sales to various other people in the restaurant.

Let’s continue with the previous restaurant example. Sticking with $3,000 as the sales figure for the average evening, let’s assume that two servers sell an equal amount of items — $1,500 in sales each — and receive an average of 15 per cent in tips. This amounts to $225 in tips per server on an average evening.

Most servers tip the ‘house’ one per cent. This amount is often cited as being used for breakage, “staff enrichment and training,” topping up the wage of the supervisor or one of several other excuses owners and managers use for taking this money. So, remove $15 to account for the house tip-out. Servers then tip the bartender an average of another one per cent. Remove another $15. They then tip the host one per cent, so remove another $15. Kitchen tip-outs accounts for an average of five per cent. Remove $75. In the end, the server has tipped-out eight per cent of their total sales. We’ve removed $120, leaving the server with $105. They have tipped-out more than they’ve kept.

Perhaps I could accept the suggestion that servers make less than minimum wage if the reality of the “tip-out” was acknowledged and legislation was proposed to protect the money that servers earn. Ontario is the first and only province to introduce legislation protecting employee gratuities. Even their 2015 Protecting Employees’ Tips Act doesn’t go far enough and there are many loopholes, but it’s a start.

Tip-handling affects worker compensation

Another Restaurant Realities’ policy recommendation document is the WCB-Alberta Tips and Gratuities. It is so far off base and out of touch it would be laughable if it weren’t so disgusting. The document is worded in a way that is incredibly convoluted, but its aim seems to be to allow employers to handle employee tips without actually having to declare that they do so.

Currently, if restaurants handle your tips, they are required to report the income to Canada Revenue and, as the policy very specifically mentions, the Workers Compensation Board. If a worker gets hurt on the job, the wage loss goes on the corporate record of the business and is used to determine future premium rates. If one worker gets injured, the premium rates increase for all workers at the work site for multiple years because of WCB’s averaging system.

Restaurants Canada is trying to ensure the worker does not receive adequate compensation when injured. By not declaring the gratuities, which make up a significant portion of the employee’s wage, they are ensuring their WCB premiums remain at a minimum and the payout the employee would receive, normally 85 per cent of their wages, would be drastically reduced by not factoring in tips. It also forces employees back to work prematurely to ensure they keep earning tips, demonstrating a blatant disregard for the health and well-being of the employee.

The excuse they use is that it is impossible to estimate how much money employees are taking in via gratuities. In reality, their concern comes down to not paying premiums. Their statement that “it is impossible for employers to accurately include tips and gratuities in their estimates of the gross insurable earnings they expect to pay employees for the upcoming calendar year” is a red herring. Not only do they know better, as they take a percentage and distribute it among other workers, but it doesn’t matter what they estimate. If they overestimate, the employer gets a rebate at the end of the year.

Business owners cannot have it both ways. They don’t want to pay payroll taxes on tips that they are handling, but the unspoken corollary is that they would like to handle those tips in order to take a portion of them.

There are plenty of other worrying policies being peddled by Restaurants Canada and provincial politicians. These are just the tip of the iceberg. If you’d like to know about restaurant reality, politicians, lobbyists and people who’ve owned a restaurant for a hot minute are not the right people to speak with. Servers, bartenders and supervisors are the people you should be engaging with.

Restaurant owners, how dare you sit around and discuss how to claw money away from the backbone of your operation while simultaneously complaining about labour shortages? Your restaurants are failing because you opened a business you weren’t qualified to work in, let alone own, and the current political climate has presented you a way to blame the worker instead of yourselves.

And Restaurants Canada, shame on you for purporting to speak on behalf of the industry. The industry isn’t only made up of business owners, it’s made up of people like me who have devoted their lives to it and love it dearly. Quite frankly, you all disgust me.