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Danny Meyer’s Restaurants Will End Their No-Tipping Policy

One of the country’s best-known restaurateurs, Danny Meyer, announced five years ago that his Union Square Hospitality Group would gradually eliminate tipping. The group’s decision began an industrywide examination of the age-old practice, but adopting it proved complicated, especially in New York State, where laws governing tip distribution are strict.

Still, especially in recent months, many Americans have come to agree with Mr. Meyer that tipping contributes to unequal pay, racism, sexual harassment and power disparities in the industry.

But on Monday, the company reversed course. Mr. Meyer told his staff that Union Square Hospitality would abandon what it calls its “Hospitality Included” policy as its restaurants reopen for outdoor dining, starting on Thursday with the flagship Union Square Cafe in the Flatiron district and extending to the nearby Gramercy Tavern in the coming weeks. (Some of the group’s other businesses are already open for takeout and delivery, and all will shift to tipped wages immediately.)

Mr. Meyer said in an interview that he still believes that tipping contributes to inequitable pay, wage instability and other problems, and that he is collaborating with the national One Fair Wage campaign to eliminate it. But as the restaurants begin rehiring today — about 95 percent of the staff has been laid off since March — he is unwilling to deny any extra compensation that might be available to employees in a time of economic crisis.

“We don’t know how often people will be eating out, we don’t know what they are going to be willing to pay,” he said. “We do know that guests want to tip generously right now.”

Mr. Meyer announced his company’s decision to eliminate tipping in 2015.Credit…Kathy Willens/Associated Press

The Hospitality Included model, which eliminated tips in favor of a consistent hourly wage, was adopted over several years as New York State’s minimum wage rose to $15 per hour. The extra labor costs for the restaurant were reflected in menu prices, which increased by 15 to 20 percent. In theory at least, the customer’s actual cost per meal would be about the same.

Wilma Cespedes-Rivera, a bartender at Blue Smoke, a Union Square Hospitality restaurant in Lower Manhattan, has worked for the company for five years. She said that for servers, the change from tipping to Hospitality Included was painful, and many talented colleagues left for other jobs.

“People understood that the goal was a healthier balance,” she said, “but it wasn’t what we signed up for financially.”

In New York State, only employees who spend at least 80 percent of their time interacting with customers — so-called front-of house-workers like bartenders, bussers and servers — can legally receive tips; cooks and kitchen workers (back-of-house employees) cannot.

Especially on weekends, when tabs and tips run higher, the difference in earnings can be stark, and often generates conflict between the two groups.

Now that employees like Ms. Cespedes-Rivera will likely again earn more than kitchen workers, Mr. Meyer said, his group will institute a revenue-sharing system for back-of-house employees, and their overall compensation will go up 20 to 25 percent.

After Mr. Meyer announced the move to end tipping in 2015, some other industry leaders, including David Chang and Tom Colicchio, tried to follow suit at their restaurants. But for most New York restaurateurs, the experiment did not last; many customers, as well as servers, remain attached to tipping.

Fair pay, like virtually every aspect of the hospitality business, is currently being scrutinized by chefs and owners as they contemplate reopening with reduced capacity, added risks and high costs.

Amanda Cohen, who has maintained a no-tipping policy at her Lower East Side restaurant Dirt Candy since 2015, said the national movement away from tipping is gaining momentum during the pandemic.

“It’s really changing the way people think about work,” she said. Especially in states where tip sharing and surcharges are allowed, like California, restaurants are coming up with new ways to compensate employees that don’t privilege one group over another. “Every little breakdown in the system helps,” she said.

Although a new law in New York State will end the tipped minimum wage for most workers on Jan. 1, the measure excludes restaurant servers, who can continue to collect tips and be paid a lower hourly wage.

In December, Gov. Andrew M. Cuomo’s office described the new law as “the end of the sub-minimum wage,” and announced that the decision was based on findings from the state Department of Labor that tipping is disproportionately harmful to “the lowest-paid workers in our state: women, minorities and immigrants.”

Although the law applies to nail salon workers, dog groomers and many others, restaurant workers — the largest group of tipped employees in the state — are exempt.

“Until the law allows all of our workers be paid a fair wage, tips are the only way to make the system work,” Mr. Meyer said.

But for small-scale restaurateurs facing existential challenges, tipping policy is “not high on the list” of priorities, said David Helbraun, a lawyer in Manhattan whose firm represents more than 1,000 restaurants.

He said his clients have one concern these days: cash flow. With restaurants barely operating for the foreseeable future, rent relief (or money from governments to pay it and other costs) is all that matters.

“None of the rest of it matters if you can’t pay the rent,” he said.

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