Elections
Louisiana – Republican Jeff Landry won the Louisiana governorship on Saturday, flipping the seat currently held by term-limited Democrat John Bel Edwards. Landry, the state attorney general, emerged from a crowded, all-party field to win the seat with 52 percent of the vote and avoided a run-off. Of additional importance, Republicans in the legislature fared well and the new governor will enjoy super majorities in both chambers. More details.
Wages
California – The governor signed legislation that would raise the minimum wage for California healthcare workers to $25/hr. The proposal was a top priority for the SEIU. In the final days of this year’s legislative session, hospitals, dialysis centers, and community clinics agreed to the elevated wage rate. In exchange, SEIU agreed to stop seeking dialysis industry regulation through the ballot for the next four years, pausing a perennial election fight between the two interests. A provision in the final bill also said a statewide health care worker minimum wage would preempt any local ordinances. More details.
California – The state attorney general’s office asserted this week that a recently-enacted law banning “junk fees” may capture restaurant service charges. The law, which goes into effect on July 1, 2024, specifically prohibits “drip pricing,” or “advertising a price that is less than the actual price that a consumer will have to pay for a good or service.” Restaurants are not specifically addressed in the law or during the legislative process, but the law states businesses will be prohibited from “advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges” other than government taxes and fees and shipping. The attorney generals’ spokesperson had told some media outlets that under the law, it is unclear how service charges would be considered. Officially, they stated, “the Department of Justice will continue to meet with industry groups over the coming months to discuss implementation of the law.” More details.
Michigan – The state elections bureau declined to approve a $15/hr minimum wage measure for the Nov. 2024 ballot. The proposal aims to raise the state’s hourly minimum wage to $15/hr by 2027, and then index it going forward. Subminimum wages for tipped workers, as well as young workers and workers with disabilities, would also be phased out under the plan. Those workers would reach the hourly $15/hr wage by 2028. Legal action by proponents will likely ensue. More details.
South Dakota – The state announced that the minimum wage will rise 40 cents, to $11.20/hr from $10.80, effective Jan 1. There will also be a commensurate increase for tipped employees, mandated to make one-half of the minimum wage. That means a rise to $5.60/hr (a 20 cent increase from $5.40). More details.
Montgomery County, MD – A county council heard legislation to eliminate the tip credit in the county. The bill, if passed, would eliminate the tip credit by raising the server wage annually until it is in line with the current $15/hr county minimum wage by July 1, 2028. The bill would also ensure that the change does not inadvertently increase a restaurant’s rent (which could happen in leases where rent payments are tied to a percentage of sales). A companion bill was also introduced which would require owners to be transparent about service charges, explaining to patrons how owners are spending dollars from those fees. No vote was taken but the bill was referred to two committees who will meet next Jan. More details.
Seattle, WA – The Seattle Office of Labor Standards announced that the minimum wage for small and large employers (501 or more employees) will be $19.97/hr starting on Jan. 1, 2024. The agency said in a release that the minimum wage will be $17.25/hr for small businesses (500 employees or fewer) that do not pay at least $2.72/hr towards employees’ medical benefits or if the employees make at least $2.72/hr in tips. More details.
Labor Policy
NLRB – A National Labor Relations Board (NLRB) administrative law judge ruled this week that Starbucks violated federal labor law when local supervisors said the company could not cover abortion-related travel expenses for organizing workers and could not extend other benefits. Supervisors at a Wisconsin store violated the National Labor Relations Act by telling workers they would not receive reimbursement for travel expenses related to abortion care as announced if they formed a union and failing to explain that those benefits would be postponed solely “to avoid the appearance of influencing the election’s outcome,” NLRB Administrative Law Judge Charles Muhl ruled. Starbucks in May 2022 said it would cover travel costs for workers who had to go more than 100 miles to access an abortion in response to the Supreme Court’s decision to overturn Roe v. Wade. A Starbucks spokesperson said the company is reviewing Muhl’s decision and “evaluating potential next steps.” More details.
Labor Activism
Cleveland, OH – Sponsored by One Fair Wage, the mayor awarded $5,000 to ten individual restaurants who pledge to use the money to bring their wage rate to at least $15/hr. The effort is in part to raise awareness of OFW’s efforts to place a $15/hr measure on the Nov. 2024 ballot that also includes eliminating the tip credit. More details.
Starbucks – Starbucks and the union organizing its workers sued each other this week in a standoff sparked by a social media post over the Israel-Hamas war. Starbucks sued Workers United in federal court in Iowa, saying a pro-Palestinian social media post from a union account early in the Israel-Hamas war angered hundreds of customers and damaged its reputation. Starbucks is suing for trademark infringement, demanding that Workers United stop using the name “Starbucks Workers United” for the group that is organizing the coffee company’s workers. Starbucks also wants the group to stop using a circular green logo that resembles Starbucks’ logo. Workers United responded with its own filing, asking a federal court in Pennsylvania to rule that it can continue to use Starbucks’ name and a similar logo. Workers United also said Starbucks defamed the union by implying that it supports terrorism and violence. More details.
Misc.
Interchange Fees – The Federal Reserve announced that it would hold a meeting next week to vote on a proposal to lower the cap on debit card interchange fees. The Federal Reserve would then start a public-comment period that would likely include heavy lobbying from card issuers and merchants and congressional discussion. It would require a final vote by the central bank’s governors to be implemented. Today, merchants pay large card issuers 21 cents plus 0.05 percent of the transaction amount, the level set by the Fed in 2011. The Federal Reserve can lower the cap if it determines the costs for processing debit-card payments are declining, but it has never done so. More details.
Key Takeaways
- The California Attorney General is now taking cues from the FTC and other industry detractors that are targeting service fees as “junk fees.” The industry is in peril of walking into another reputational trap. Operators need to carefully evaluate when and how they apply fees. This is clearly going to be an area that continues to draw scrutiny.
- 2024 is shaping up to be a very big year at the ballot for the industry. The voters – our customers – are going to the polls in Arizona, Ohio, Michigan, Massachusetts, and potentially elsewhere and making a judgment on the efficacy of the core business model of much of the industry. The potential for the elimination of the tip credit in such populous states could be the beginning of a permanent change of the industry’s structure. Full service brands need to begin evaluating how hard they want to protect the current tipping model. A proper defense in those states will cost the industry tens of millions of dollars. Eliminating tipping in those states will cost exponentially more.
- The Restaurant Association of Maryland and the industry had another big win this week in Montgomery County. The industry showed up in force, putting a lot of pressure on council members and rebutting much of One Fair Wage’s rhetoric. The ultimate outcome in Montgomery County will not be determined until the New Year but the industry has a fighting chance for a favorable outcome. And, the balanced press coverage in Montgomery County impacted the national narrative as Chicago officially approved legislation to eliminate the tipped wage this week.
Podcast
Check out our Working Lunch podcast each week that includes further analysis into these legislative issues, policy, politics and much more. You can find Working Lunch on the Restaurant Business online website, SoundCloud, iTunes and Spotify.