A Colorado restaurant industry battered by increasing costs and regulations will ask legislators Thursday to help it in a way that officials believe can make a huge difference — reducing wage requirements on its already highly compensated bartending and wait staff.
In doing so, groups like the Colorado Restaurant Association will find themselves in a decidedly different position than they’ve occupied for several years, when they’ve rallied sector workers to fend off proposed regulations like the 2023 “Fair Workweek” bill. And in seeking proactive help, they’ve amassed a coalition that includes both conservative small-government Republicans and liberal pro-labor Democrats who believe the existing stream of eatery closings will grow into a raging flood if something is not done.
House Bill 1208, sponsored by Democratic Reps. Steven Woodrow and Alex Valdez of Denver, would cut the minimum wage that restaurants must pay tipped staff in cities and counties that have raised minimum hourly pay above the state’s mandated floor wage. That would impact workers only in the cities of Boulder, Denver and Edgewater and the unincorporated areas of Boulder County now, but the proposal could cast a broader net as more local governments consider hiking their minimum wages.
A focus on Denver and other high-wage cities
It’s no coincidence both sponsors are from Denver, which the Denver Post has reported has seen a 22% decrease in restaurants since 2021, with many owners pointing to rising labor costs brought on by the city’s $18.81 minimum wage, which is $4 above Colorado’s. The 2019 law that allowed local governments to exceed state minimums for pay also permits employers to pay tipped workers $3.02 less per hour, but that means tipped workers in Denver still must get $15.79 per hour — a 60.6% increase just since 2020.
CRA surveys found that the minimum-wage hike alone cost the average Denver restaurant $82,412 this year, in addition to rising costs for food and rent and a changed dynamic in which breakfast and lunch crowds have dipped as more people work from home. But even more problematic in some ways is the fact that it’s exacerbated wage gaps — and tensions — between servers and kitchen staff, who don’t benefit from tips.
With gratuities, the average Colorado tipped worker now makes between $39 and $42 per hour, while non-tipped workers make $19 to $23 hourly, according to a CRA survey done this month. To cover the costs of pay boosts needed for tipped workers who already make more than most staffers, restaurants have had to cut staff (particularly entry-level positions), reduce hours and cut menu items, industry leaders have reported.
HB 1208 would reduce the minimum wage for non-tipped workers to $3.02 above the statewide minimum wage — $11.79 for now, though that will rise annually with inflation. That would mean Denver restaurateurs could lower base wages for those tipped employees by $4 starting in October, creating savings of more than $100,000 annually for some eateries at a time when many restaurants say they are teetering on the brink of closure.
How restaurant owners would use the savings
Sonia Riggs is president and CEO of the Colorado Restaurant Association
But just calling that money a savings for a restaurant would be inaccurate, CRA President/CEO Sonia Riggs said, even as she noted that most restaurants report that labor costs have risen from 25% to 50% of expenses and profits often range between 1% and 2%. In that recent survey, 63% of restaurateurs said they would use at least part of the savings to boost pay for cooks and dishwashers, 57% said they would invest in other areas of their businesses and 56% said they would increase staff hours.
Plus, many Denver restaurants aren’t planning to cut every server’s wage to $11.79 per hour, Riggs said. They may reduce base wages to a level above that or may just start new tipped workers at the lower wage. And, she added, a cut to $11.79 per hour would still leave the minimum wage for tipped workers significantly higher than it is in notoriously high-cost cities like New York ($11) or Washington D.C. ($10).
“I think you’re going to see some instant raises to the back of the house,” said Riggs, referring to the kitchen staff. “If it’s a difference between staying open and closing — and a person making zero dollars an hour — I would rather keep that job than to not have a job.”
Pushback from worker-advocacy groups
But the Bell Policy Center, a nonprofit organization that advocates for higher wages and economic mobility, said that despite the talk of closing wage gaps and adding hours, HB 1208 does one thing — it lets restaurateurs lower wages for a large group of workers. And that is alarming at a time when so many service workers are struggling financially, director of policy and research Andrea Kuwik said.
If there is concern about wage gaps within restaurants, a more holistic conversation about sector pay levels and tipping policies would be more productive than just cutting back on guaranteed hourly pay, Kuwik said. She also is worried about the bill’s allowance for the change to take place as soon as October when many workers may be locked into apartment leases for the year, meaning they could struggle to make up for money that they’d expected to have, she said.
“Whenever we take a look at this bill, we don’t see anything in the text that says, ‘We would take money that we would be saving by this and we would pass it along to other workers in our space,’” she said. “That doesn’t seem to be the prime purpose or intent of the bill.”
But the coalition building behind the bill has expanded beyond the typically active CRA. Support is coming from niche industry groups like the EatDenver independent restaurant association and the Tavern League, downtown partnerships in Boulder and Denver and business groups including the Colorado Chamber of Commerce, which calls it a “balanced solution” giving restaurants flexibility while requiring them to still offer competitive wages.
Restaurant operators “just hanging on”
John Jaramillo, president of the Hispanic Restaurant Association, speaks Wednesday at a news conference on construction-defects reform.
The Hispanic Restaurant Association, whose members are disproportionately small businesses, has become one of the loudest proponents of HB 1208, with President John Jaramillo noting that big chains can absorb labor cost hikes more easily than his members. Restaurants struggling with margins under 2% can save enough money both to achieve a sustainable bottom line and to invest in kitchen workers, while servers will still make healthy paychecks in businesses that will have better chances of remaining open, he said.
“Big-picture-wise, I support it because it helps the restaurant owners stay in business,” Jaramillo said. “Many of our restaurateurs are saying this is getting tougher and tougher, and they’re just hanging on.”
Riggs added that HB 1208 is not the only help that her industry will be seeking from legislators this year. She expects a bill to be introduced this week that would exempt from the typically 3% fees that banks charge restaurants on credit-card transactions any tips or taxes, reasoning that is not money being earned by businesses.
HB 1208 is scheduled for its first hearing Thursday afternoon before the House Business Affairs & Labor Committee in House Committee Room 112. It is slotted third on the 1:30 p.m. agenda.