Goodbye, Ruby Tuesday: an Indictment of the Corporate Restaurant Industry, pt. 3

This is part three of a three part series (dare I say exposé?) on the corporate restaurant industry.

Goodbye, Ruby Tuesday: an Indictment of the Corporate Restaurant Industry

The closing of so many chain restaurants is one of the few bright spots in an utterly dreary economic state. Corporate restaurants are a bane to American society. Making a buck is never wrong, but these companies have done so by enslaving workers, knowingly poisoning their customers and sabotaging small business. We should not be lamenting the fall of the corporate restaurant industry, but rather celebrate it by be prosecuting the CEO’s and politicians who conspired to create the nefarious beast.

America’s Modern Slave State

The onslaughts on the general public and small business are not the only transgressions of corporate restaurant chains as their workers (servers, bar tenders and the like) are the only profession in the entire nation that are not paid minimum wage. Try, if you can, to imagine how your life might change if the state you live in passed a law that said your employer now only has to pay your profession $2.50/hour. The rest of your income is solely up to the generosity of strangers. Additionally, the government makes you pay taxes on these charitable contributions regardless of whether or not you actually receive them. As if that were not enough, you also have to work every holiday without receiving overtime or holiday pay. And you can forget about sick-leave all together.

Now let’s sweeten the pot a little by informing you that if someone who is inebriated happens to enter your work area you are now personally responsible for every action that person takes until they sober up. Regardless of whether you provide them with alcohol or even conduct business with them in any manner you are still criminally liable for their actions.

It sounds preposterous does it not? This is the 21^st Century; the conditions just described sound like something out of a Dickens’ novel. At best this is an extreme example of the deplorable human rights violations in some war-torn African nation. One thing is for sure, this could never happen in America, not with all this change and hope floating around.

Sadly the circumstances illustrated do exist today and right here in River City.

As it turns out the restaurant industry is exempt from US Federal minimum wage laws. Each state is free to set whatever minimum wage they deem for bartenders, bussers, servers, and even hostesses as little as $2.13 an hour. A few states are enlightened enough to guarantee these workers the same minimum wage as any other profession. Most do not. In fact only eight states currently require the same minimum wage for restaurant workers as everyone else. The remaining 42 states allow companies to legally pay their workers less than what economists and society have agreed is a fair wage.

In Alabama for instance the server wage is $2.13 an hour or one third the current minimum wage. Florida is scarcely better at $3.50 an hour. Montana and Minnesota have two minimum wages for servers (both are below the national minimum) – one for big business and a lower one for small. The corporations argue that this punishes them for being successful while small businesses insist the better servers opt for the chains leaving them to pick through the leftovers. In Nevada full time restaurant workers are actually forced to choose between a fair wage or health insurance.

A gratuity is a bonus for a job well done; a little something extra for going beyond the norm, or at least it used to be. By making servers rely on tips to pay their wages and then taxing those tips, the government has in effect made it a law that everyone must tip at least 10% regardless of the quality of service. Whether a 10% tip is left or not the server still pays taxes on it. Consequently, anyone who fails to leave 10% is in reality stealing from the server.

Some people do not know that the bulk of a server’s pay comes from tips and assume that restaurant workers make a fair wage like everyone else. And why wouldn’t they? After all, there is a federal minimum wage and excluding one profession from having to adhere is unethical.

Lobbyists working on behalf of the large restaurant cartels rely heavily on the argument that servers make very good money in the form of gratuities. In fact, that is the entirety of their argument – servers earn so much money on tips that their bosses should not have to pay them for their toil. So this begs the question, just how much money are we talking about?

If the money servers earn is as good as argued then surely they make in excess of $75,000 a year, maybe as much as $174,000 – the annual salary of a US congressmen. According to the US Department of Labor in 2006 the median hourly wage-and-salary earnings (including tips) of servers was $7.14/hour. In most cases, the hourly wage does not even cover their tax burden leaving them still owing the government money at the end of the year. The same government that says that their effort is not worth as much as other professions apparently does not feel likewise about their tax obligation.

Still many may contend that servers make great money for no more work than they do. After all, all they do is take your order and bring you food that someone else cooks and drinks that someone else mixes, right?

In addition to clearing their tables and cleaning them for the next party, they also have what is called side work. Side work consists of tasks that must be performed to keep the restaurant running smoothly. Many of these duties are simple and occupy little time like rolling silverware into napkins. Others include considerable labor like hauling heavy buckets of ice from one end of the building to the other, vacuuming large sections of food-embedded carpet, mopping floors, preparing foods, cleaning bathrooms, and scraping bubblegum from underneath tables.

Side work comes in three forms and almost every restaurant requires its servers a certain amount as part of their daily performance. The three types of side work are opening (performed before the shift), running (performed during the shift), and closing (performed after the shift). Although the restaurant must pay the server a regular minimum wage for side work performed prior to opening the same is not said for closing side work which typically constitutes the most arduous and time consuming chores. Federal law states that one hour after a server’s final customer leaves the employer must then pay the employee the standard minimum wage.

Thanks to the way the wage law is written employers are actually allowed to pay less than minimum wage for one full hour despite the fact that the employee makes no tip for that labor. Some companies deliberately exploit this loophole by piling extra work on the tip earners that previously was performed by higher wage earners. Although this practice is entirely unethical, remarkably it is legal.

Some families are on budgets that prevent them from spending very much. These people may actually tip the standard 20% but they are forced to streamline their order. A standard 20% tip on the least expensive item is better than nothing, but it requires the same amount of effort as the most expensive dish and in some cases more. A server at The Olive Garden for instance actually does more work for customers who order the economical soup, salad, and breadsticks than for those who order a more expensive entrée.

The Olive Garden is one of the concepts owned by dining conglomerate Darden Restaurants, Inc. out of Orlando, FL. Darden also operates Red Lobster, Smokey Bones, Longhorn Steaks, and Bahama Breeze making it a classic example of the typical restaurant corporation. Darden owns and operates more than 1,700 restaurants across North America employing roughly 160,000 people. Darden is, in terms of revenue, the world’s top restaurant operator.

But Darden is hardly the only player in the ultra-competitive multi-unit market. Brinker International, Inc. out of Dallas, TX which owns Chili’s, On the Border Mexican Grill and Cantina, Maggiano’s Little Italy, and Romano’s Macaroni Grill is another titan of the industry with more than 1,800 restaurant locations in 20 countries. They, too, are one of the largest restaurant cartels in the US and as such are one of the largest employers of restaurant workers in the country.

CLICK FOR LARGER IMAGE. Despite working nearly 30 hours this Olive Garden employee took home nothing after state and federal taxes were applied.

On average a server who works roughly 30 hours a week and earns 15% in tips will have a weekly paycheck totaling zero after taxes. Not only does Uncle Sam dip into servers’ tips, but many restaurants make them “tip out” their fellow employees. Servers must share their hard earned money with hostesses, bussers, dishwashers, and even bar tenders. Tipping out allows business owners to also under pay non-tip earning employees by classifying them as tip-earners. A server’s “tip out” is determined by a percentage of their sales for the shift and ultimately denies them of anywhere from 15% to more than 50% of their daily earnings.

So if the same argument used to justify paying servers a substandard wage is applied to other professions then school teachers would have to choose between making a living wage and having medical insurance. Corporate executives would be making $3.50 an hour with the rest of their pay coming from board members stuffing dollar bills into an old pickle jar. That would include men like David Goebel, the former CEO of Applebee’s International Inc. who took home $2.7 million in 2006 while paying his servers less than $3 an hour.

Be sure to check out the first two parts of this series The Big Bad Wolf – Mom and Pop Under Siege and Biting the Hand that Feeds.