Minneapolis restaurant owners push for 'tip credit' as City Council considers raising minimum wage

Frustrated Minneapolis restaurant owners are making another pitch for tips to count as wages as the City Council begins to craft an ordinance to raise the minimum wage.

A higher minimum wage — perhaps $15 per hour — without a tip carveout has been under discussion at City Hall since January, when Mayor Betsy Hodges came out firmly opposed to what she and others call a "tip penalty," prompting an outcry from many restaurant owners and servers. But now the measure is gaining momentum.

A majority of council members have said they agree with her and will vote for a $15 minimum wage with no exceptions. A legislative measure that would have prohibited local labor ordinances is headed for defeat at the Capitol. And city staff published a report earlier this week recommending that tips not be counted as wages for the purposes of a minimum wage. The City Council will review the report Thursday morning.

Restaurant owners, doubtful their concerns have been heard at City Hall, say they are afraid of speaking their minds on the complicated topic. Activism on both sides of the issue has proved divisive, even prompting one restaurant to shut down its Facebook page. As the council proceeds with shaping the ordinance, many restaurateurs are resigned to a minimum wage hike without a tip credit.

"I think it's going to go through, and we're all just going to have to figure out how to deal with it," said Adam Sieve, an owner of Hazel's Northeast restaurant. "I'm just surprised that the idea of a more nuanced approach for business owners isn't on the table."

Restaurateurs in Minneapolis decided last year they wouldn't fight a $15 minimum wage, and instead focused on pushing for tips to be counted as wages. Bar and restaurant owners already pay Social Security and Medicare taxes on employee tips, which the IRS treats as wages, so it seemed to them to be a reasonable request.

They argued that many servers already make well over $15 an hour, and they said a new minimum wage ordinance should require businesses to make up the difference for workers whose tips don't bring their hourly wage above $15.

The proposal, however, got caught in a political buzzsaw of a city election year.

Unions and candidates seeking their endorsements say a two-tiered wage system would be an unacceptable step backward for Minnesota, which is one of only seven states that doesn't have a lower minimum wage for tipped workers.

Meanwhile, many restaurant owners, through the Pathway to 15 group, allied themselves with the Minnesota Restaurant Association. The association has pushed for a tip credit in Minneapolis but also lobbied for the state legislation that would block local labor ordinances.

Those pushing for a higher minimum wage without a tip credit, including the group 15 Now, have seized on the restaurant lobby's two-pronged effort and called out the seeming duplicity. Local restaurant owners, some of whom don't want the preemption bill to pass, have borne the brunt of their criticism.

"If you eat out in Minneapolis and one of the places you patronize belongs to the pathwayto15.org group, please consider withholding your patronage until that restaurant leaves the group — or at the very least let your displeasure with their position known to management," Javier Morillo, one of the mayor's most vocal political allies and head of the Service Employees International Union Local 26, wrote in a Facebook post last week that was shared 34 times.

Jamie Robinson, one of the owners of Northbound Smokehouse Brewpub and a proponent of a tip credit, had to shut down his business' Facebook page for a day this week when negative reviews started rolling after he told CityPages, "If you're fighting against the livelihood of my servers, you're not welcome in my brewpub." He meant, he said Wednesday, that he doesn't want people coming to his business if they're trashing it online.

Other restaurant owners said they don't want to speak publicly on the issue for fear of backlash. Some bemoan the way aligning with the Minnesota Restaurant Association entangled the tip credit issue with the debate over the preemption legislation.

"It is very much a rock and a hard place," said Mary Cassidy, the owner of Maeve's Cafe in Northeast. "I don't want the Legislature to prohibit everything and say cities can't make their own laws."

Cassidy, who's owned small businesses in Northeast for 22 years and whose grandfather was a union organizer, said preemption legislation, and the restaurant lobby's support for it, has poisoned the local debate.

Robinson, at Northbound, who calls himself a lifelong progressive, said he wasn't initially supportive of a preemption bill, but he landed there after losing hope of a tip credit as part of a higher minimum wage.

"If the only savior is to get in bed with the enemy, then that's really the only option we have," Robinson said.

Adam Belz • 612-673-4405

Twitter: @adambelz