Tag: Minimum Wage

The Bottom Line on the Impact of Minimum Wage Hikes on the Restaurant Industry

Minimum wages are rising across the country, with well over a dozen states, plus many cities increasing minimum wages over the past few years.  As those changes are implemented, restaurant owners are finding that they must make significant adjustments to how they run their businesses in order to stay in business.

 The Bay Area of California was one of the first regions to begin increasing minimum wages, and as of January 1, 2018, the minimum wage increased by 37 cents to $13.23 in Oakland, and in San Francisco it rose from $13.00 to $15.00 effective July 1, 2018.

One impact on the restaurant industry is the change from full service restaurants – with hosts and full waiter service – to counter service.  Some restaurants have actually seen such changes result in significant sales increases – by as much as 20% – after the change from full service to counter service.  And at the same time, being able to reduce menu prices due to the ability to cut staff due to the change to a counter service format.  The downside here is that there are fewer jobs available to restaurant workers with owners focused on a lean labor paradigm.  At some restaurants, cooks serve dual roles – both preparing food and delivering it to customers.  Customers are also finding themselves taking on new ‘responsibilities’ such as being able to text additional orders rather than going back in line it they want more food than they originally ordered at the counter.

Thus, the increase in minimum wage has resulted in more satisfied employees (albeit fewer) earning a better living, increased restaurant industry innovation, and restaurants becoming more accessible to the population as whole as a result of lower menu prices.

Seattle became the first major city in the country to pass a $15.00 minimum wage law in 2014.  Large restaurant groups and franchises were particularly concerned about the increase because employers with more than 501 workers were required to increase wages on a set schedule reaching $15.00 per hour this year.  As a result, large Seattle restaurant groups and chains were forced to look for ways to adjust and innovate.  Many felt that increasing menu prices was not an option because of concerns that such increases would result in lower revenue.  So these restaurants did away with discretionary tipping and, instead, implemented set service charges of fifteen or twenty percent.

To offset rising labor costs, some restaurants add a surcharge of three to five percent to customers’ checks.  In March of last year, the Wall Street Journal even ran an article entitled “New on Your Dinner Tab: A Labor Surcharge.”  Restaurant owners found that raising menu prices lead customers to choose less expensive items than they normally would, and that the surcharge helped mitigate the increased costs of doing business.

In addition to raising prices, in order to deal with increased wages in the restaurant industry, some businesses often cope with minimum wage increases by firing staff.  Earlier this year, Red Robin Gourmet Burgers announced it would eliminate busboy positions at 570 restaurant locations. Many single location restaurants have also had to eliminate busboys and other staff positions.  Others have not been able to adapt and have had to close their doors. Some have turned to technology to compensate for the loss of labor and to reduce expenses. Large chains such as Chili’s, Applebee’s, and Olive Garden have replaced some servers with table-side tablets for placing orders and paying bills. 

Technology has also helped other businesses expand.  For example, popular online service, GrubHub, has reduced the number of customers dining out, as consumers can enjoy a restaurant style meal without getting up off their couch.  

The takeaway for restaurants facing increasing minimum wages and labor costs?  Scrutinize your budget and personnel and determine how to satisfy ever-changing employee and customer demands, and be willing to change.

For further information regarding this topic, please contact:

Jonathan M. Weis at jweis@lgattorneys.com or 312-368-0100.

 

 

 

Cook County Raises Minimum Wage

On October 26, 2016, the Cook County Board passed an ordinance to gradually increase the minimum wage to $13.00 per hour by 2020. The Cook County Board’s action follows the lead of the City of Chicago which in 2014 passed an ordinance to gradually increase the minimum wage in Chicago to $13.00 per hour by 2019.

The first increase is effective July 1, 2017, raising the minimum wage from $8.25 to $10.00 per hour. The minimum wage will increase again on July 1, 2018, to $11.00 per hour; on July 1, 2019, to $12.00 per hour; and on July 1, 2020, to $13 per hour. The ordinance applies to any business or individual that employs at least one employee who performs at least two hours of work in any two-week period while physically present within the geographical boundaries of Cook County, with limited exceptions.

The ordinance also requires Cook County employers to provide notice to their employees regarding their rights under the ordinance, including: (i) conspicuously posting a notice at each facility within Cook County; and (ii) providing a written notice to employees with their first paycheck issued after July 1, 2017.

Employers are subject to significant penalties for non-compliance with the ordinance, including, but not limited to, fines in the amount of $500 to $1,000 per each day of non-compliance. The ordinance also establishes a private cause of action for employees who may recover damages against an employer in an amount equal to three times the amount of any underpayment, in addition to the employee’s attorneys’ fees and costs. An employer’s failure to comply with the ordinance may also violate other laws including the Illinois Wage Payment and Collection Act, Illinois Minimum Wage Law, and Federal Fair Labor Standards Act, which also provide for an employee’s recovery of damages, interest and attorneys’ fees.

If you have any questions regarding the minimum wage applicable to your business or your obligations under the new Cook County Ordinance, please contact:

Kristen E. O’Neill at:

koneill@lgattorneys.com or 312-368-0100.

Illinois Freedom to Work Act Prohibiting Non-Compete Restrictions for “Low-Wage Employees” is Signed in to Law

On August 19, 2016, Illinois Governor Bruce Rauner signed into law the Illinois Freedom to Work Act. The new law, which is effective January 1, 2017, prohibits employers from entering into covenants not to compete with low-wage employees and provides that any agreement entered into in violation of the Act is illegal and void.

Under the Act, a “low-wage employee” is any employee who earns the greater of: (1) the hourly rate equal to the minimum wage required by the applicable Federal, State, or local minimum wage law; or (2) $13.00 per hour.

Covenants not to compete prohibited by the Act include agreements that restrict a low-wage employee from performing:

  1. work for another employer for a specified period of time;
  2. work in a specified geographical area; or
  3. work for another employer that is similar to such low-wage employee’s work for the employer with which the employee entered into the agreement.

The Act appears to apply only to covenants not to compete and does not expressly apply to non-solicitation agreements prohibiting low-wage employees from soliciting the employer’s customers or employees. The Act also does not prohibit non-disclosure or confidentiality agreements to protect an employer’s confidential information.

If you have any questions regarding the Illinois Freedom to Work Act or would like to discuss the preparation of employment agreements for your business, please contact:

Kristen E. O’Neill at:

koneill@lgattorneys.com or 312-368-0100.

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