Council proposal tips toward servers

Posted: November 02, 2011

CONVENIENCE has a cost, and some Philly businesses are passing it along to servers, bartenders and other workers every time a customer leaves a tip on a credit card.

City Council may change that.

Council yesterday heard testimony on a bill that would prohibit restaurateurs and others from using portions of employees' credit-card tips to pay transaction fees. The bill, introduced in May by Councilman James Kenney, could be voted on next week.

Restaurant employees - who rely on tips to supplement a base wage of $2.87 per hour - say that the practice generally siphons between 1 percent and 3 percent of their total credit-card tips and leaves them feeling cheated.

"It's morally wrong, especially with huge companies," said Joshua Albert, a restaurant-industry blogger who backs the bill.

Andrea Lemoins, co-coordinator of the Restaurant Opportunities Center of Philadelphia, estimates that 25 percent to 30 percent of restaurateurs in the city take credit fees out of servers' tips.

About half of those restaurants are "small mom-and-pop places," she said, and the rest are owned by "one of the most powerful restaurateurs in Philadelphia," Stephen Starr.

A former server at a Starr restaurant and bar who did not want to be named said that about 2 percent of his credit-card tips typically were used to pay transaction fees - aside from money turned over to pay busers and bartenders.

"I don't understand where all the money goes," he said. "It doesn't seem like a lot, but it definitely adds up."

One prominent restaurateur who did not want to be identified said she does not use part of her employees' tips to pay for the fees, although the rising cost of credit-card transactions leaves some business-owners struggling to make ends meet.

"It's kind of a racket anyway," she said of the fees. "I wish I could just accept cash."

Albert said that most restaurant employees are unaware that their tip money could be taken to pay fees and that customers who pay by credit card are also oblivious to it.

The real issue, Kenney said, is doing the right thing.

"People who work for a living like that deserve the money that we leave," Kenney said.

"If the restaurant owner wants to pay the federal minimum wage, they can take the 3 percent, but you can't pay them $2.87 and then take a part of their tip. It's just not fair."

Patrick Conway, president of the Pennsylvania Restaurant Association, did not show up at yesterday's hearing, but submitted a statement saying that forcing restaurant owners to pay credit-card fees themselves instead of taking a percentage of servers' tips could create an enormous financial burden.

Conway said the burden "could put many restaurants out of business and create a loss of jobs."

If enacted, the bill would extend beyond the hospitality industry and protect all employees who are paid a gratuity.

A provision would allow workers to file grievances against an employer, who would be forced to repay tip money withheld from employees.

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