Many restaurateurs in Massachusetts know the minimum wage goes up come Jan. 1. But they could be in for a rude surprise.
The state law behind the wage hike also reworks the way restaurants calculate how they pay tipped workers — and a trade group says payroll systems won’t be able to accommodate the changes, at least not right away.
The problem is tied to how employers make up the difference between what they pay and what servers make in tips. On slow days, businesses need to ensure tipped workers make at least the state minimum. Until now, they can use all the tips brought in over a full pay period to calculate average take-home pay, and adjust for any shortfalls. Starting New Year’s Day, the law requires restaurants to make this calculation by shift, not by payroll period.
The Massachusetts Restaurant Association has been lobbying legislators to delay this requirement for up to two years. Its chief executive, Bob Luz, said most restaurants use payroll software that can’t be adjusted in time, and the smaller operators will face piles of new paperwork.
But Luz hasn’t had much luck so far. Lawmakers have been meeting in informal sessions through the end of the year, when no roll call votes are taken and a single member can block a bill.
Revisiting the wage law could be like opening Pandora’s box. Here’s why: The law followed months of intense negotiations with business and labor leaders, culminating in what was known as the “grand bargain.” That legislative package included the minimum wage increases, a paid family leave mandate, a permanent sales tax holiday, and a phase-out of the time-and-a-half pay requirement for retail workers on Sundays and holidays.
Change one thing, and other interest groups could come forward, seeking their own tweaks.
Harris Gruman, a key negotiator for the Service Employees International Union, said he doesn’t sense strong concerns about the restaurant association’s proposed delay among his members. But he opposes reopening the grand bargain, in part because it included a number of controversial aspects that others might want to revisit.
Luz hasn’t given up, even as time runs out. He pointed to a letter from the American Payroll Association, sent in September to House Speaker Bob DeLeo, asking for a one-year delay because payroll software can’t easily accommodate calculating tip pay on a per-shift basis.
This could drive up costs for restaurants on particularly slow days, without them being able to use the busy days later in the week to balance things out. But Luz said the direct cost would be minimal, because nearly all servers make enough with tips to clear the minimum. The bigger issues: the headaches and lost time from all the work to figure this out. Many restaurants will need to make these calculations manually, Luz said, until their payroll companies catch up.
Then there is the potential legal exposure. Matt Horvitz, an employment lawyer with Goulston & Storrs, predicts a legal minefield: This could provide for easy pickings for plaintiffs’ attorneys seeking to start a new kind of class-action suit, he said, because so many restaurateurs are unaware of the change.
The state’s overall minimum wage rises to $12 an hour from $11 on Jan. 1, and then gradually to $15 by 2023.
The current $3.75 minimum wage for tipped employees, meanwhile, goes to $4.35 immediately, and to $6.75 eventually. That seems easy for restaurants to calculate. The burden of changing to a new payroll approach? That won’t be as simple.