The Michigan Legislature made waves in the restaurant industry in September by adopting the One Fair Wage ballot proposal that would gradually raise the state’s minimum wage and eliminate the tipped minimum wage. But as of this week, state senators have introduced bills to remove key provisions of a new law that would have made Michigan the eighth state in the nation to get rid of the tipped credit.
The ballot measure had been was undeniably controversial in the state. The Michigan One Fair Wage proposal, backed by the progressive restaurant labor group Restaurant Opportunities Center, called for gradually increase the state minimum wage from $9.25 per hour to $12 per hour by 2022, and slowly increasing the tipped minimum wage from $3.52 per hour with at least an average of $5.73 per hour in tips to $12 per hour by 2024. While the measure gained 283,544 valid signatures — enough to land on the Midterm election ballot — some Michigan restaurant owners as well as the Michigan Restaurant Association strongly opposed the ballot proposal. They claimed that eliminating the tipped minimum wage would raise labor costs by 241 percent, forcing job cuts, increase menu prices, and reduce take-home pay for some tipped employees.
Tipping in restaurants is undeniably ingrained into American culture, but there’s an increasingly strong case against tipping. Critics of tip culture point to its roots in post-Civil War policies, through which companies used gratuities to avoid paying African-Americans and immigrants a fair wage. Those opposed to the two-tiered tipping system also cite evidence that tip minimum wages reinforce systemic racism, sexism, and harassment. As a result, discussions about the ethics of tipping have become more common in the restaurant industry and have led major restaurant groups such as Danny Meyer’s Union Square Hospitality Group to eliminate the practice. Several cities and states have also followed suit, passing laws to raise wages and eliminate tipping.
Now it appears that Michigan is close to ending the tipped credit practice, though substantial political challenges stand in the way. By taking up the measure as law, the GOP-dominated state legislature made it easier to amend the law with a simple majority vote in a post-Midterms lame-duck session. Organizers of the One Fair Wage campaign, in turn, have vowed to oppose any significant changes to the language of the original proposal in court.
Depending on how the issue ultimately shakes out in the legislature, restaurants will have to begin planning for the possible end of tipping in Michigan. There are many examples nationwide of restaurants that have tried no-tip models, but it’s still far from commonplace in the Wolverine State. Still, a handful of notable owners throughout the region are testing out different no-tipping models in their restaurants and setting an example for others. Those who have moved away from tipping — such as Folk, Miss Kim, Rose’s Fine Food — say that the model opposes discriminatory practices, prevents employees from depending on inconsistent tips to make a living, and fosters a collaborative team environment. The model, however, is not without its challenges. Here’s what worked (and what didn’t) at these trailblazing restaurants.
Detroit | Opened in 2018
Kiki Louya and Rohani Foulkes, owners of Folk and the Farmer’s Hand, are advocates of the tip-free model. They implemented the policy when Folk, the all-day Corktown brunch café, opened its doors in April 2018. Instead of customers determining their tip, an 18 percent hospitality charge is automatically applied to all bills at Folk. “This is something Kiki and I have felt strongly about from the get-go,” Foulkes says. “We’re really working to question and push back on and change a really ingrained culture that undermines the value of the work that we do,” she says.
Folk declined to give the exact wage, but say employees at the restaurant are paid more than 300 percent more than the current state tipped minimum wage of $3.52 per hour. Of the restaurant’s 20 employees, four are salaried supervisors. Salaried employees are eligible for maternity and paternity leave and paid sick and vacation leave from 10 days up to four weeks.
Although Louya and Foulkes felt strongly that eliminating the tipped wage was the ethical way to do business, the pair initially found that the message wasn’t catching on with customers. Foulkes says that customers would automatically add a tip, despite the signage in the store. Recently, the women took a step further and removed the tipping line from final checks. That decision in turn prompted customers to ask why they couldn’t they leave a tip. “We created this environment where dialogue was even more important with our customers,” Foulkes says. There is also language on the menu and website explaining the reasoning behind the hospitality charge.
But to have a tip-free model, Louya and Foulkes say that they are sacrificing a bit of their own profits. “It’s a choice we make for ourselves,” Louya says. “You could potentially make money hand over fist if you so choose to structure your business that way. We believe in contributing to the greater good and to our community by providing opportunities like this for employees in the restaurant industry.”
Ann Arbor | Opened in 2017
Ji Hye Kim adopted the no-tipping model when she opened her Korean-influenced restaurant Miss Kim in Ann Arbor nearly two years ago. Miss Kim, part of the Zingerman’s restaurant group, offers a starting wage of between $12 and $12.50 an hour, depending on experience and performance during trial shifts. Servers are paid $13-$14 an hour. Full time employees receive a full benefits package that includes paid time off, medical, dental, vision, and 401k. Part-time employees are also eligible for a partial benefits package.
Kim says she settled on that starting wage based on her own knowledge that counter service staff in Ann Arbor make between $9 and $12 an hour. The restaurant provides opportunities for growth through cross-training between departments. If, for example, an employee is a dishwasher and expresses a desire to be a line cook, they will get trained. Employees get a 50-cent raise each time they advance to a new position. However, onboarding inexperienced staff takes more time and resources, Kim admits. She estimates that it takes two to three months to train new servers.
The elimination of tips helps team and staff relations. Kim says there is little conflict on the floor, and they tend to retain employees longer. It also has other benefits as a manager, she says. When employees aren’t relying on tips, the restaurant expends less energy determining what sections servers are assigned to, how employees report tips, and mediating between front and back of house staff. She notes that tipping is also tied to higher rates of sexual harassment.
Because a no-tipping format can feel unfamiliar to some customers, Miss Kim’s team spends time educating patrons about how it works. Kim says customers are told upfront that the restaurant is gratuity-free and everything is built into the menu price. There is also language on the website that explains why there is no need to tip. “I find the most effective way to communicate with customers is to explain what’s in it for them,” she says.
Unlike Folk, Miss Kim does not charge a flat gratuity on all bills. Instead, to offset the cost of providing employees a higher wage and benefits, Miss Kim raised menu prices between 10 and 12 percent.
“The public is fine with it as long as they’re getting great food and great service and they feel like they’re getting value for their money,” she says. “I’m happy with what I’m doing and I’m proud of the work we’re doing.”
Rose’s Fine Food
Detroit | Opened in 2014
When Rose’s Fine Food first opened in 2014, the breakfast and lunch diner introduced a no-tipping policy where employees were paid a living wage and gratuity included in the price of the food items. However, owner Molly Mitchell says that Rose’s customers were uncomfortable with not tipping and continued to do so in spite of the policy.
Since tips were still being left behind, Mitchell and her cousin Lucy Peters, who was co-owner at the time, had to decide what to do with the money. “We thought about donating it, but that didn’t feel right because that’s money the employees earned,” Mitchell says. “So we said if people want to tip, we’ll just split it between all of the employees. It happened pretty organically.”
Today there are roughly 12 employees at Rose’s who start out at $10 an hour and are eligible for raises every six months with an evaluation, Mitchell says. With tips included, the hourly wage rises up to around $16 per hour. Mitchell and Peters decided on the starting wage based on places they previously worked and felt respected and paid well. Other benefits include free meals during shifts. Staff can also host potluck dinners, and use the money earned to travel out of state for culinary training.
However, Mitchell says there are drawbacks to not having a traditional tipping model. It’s sometimes difficult to find experienced waitstaff. “It’s like a shift in mentality to just make an hourly wage, and sometimes it doesn’t fully compute,” Mitchell says, adding that new employees are thoroughly trained, especially on the diner’s culture.
Despite the challenges, Mitchell says the current model is working well for employees and customers. “Unfortunately, there’s a power dynamic that exists with people with tipping where they feel like they could withhold wages from somebody if things don’t go their way,” she says. “So we wanted to take some of that drama away from the staff. You can feel good at your work and you know nobody can mess with your wages. It’s about the guest experience too. We want people to come in and feel like they’re getting good value for what they’re eating and they’re supporting their local community as well.”