Florida’s Minimum Wage and Tip Credits

With more and more issues pressing on the Industry’s “bottom line,” FRLA Magazine at times publishes letters from our members that provide insight to the struggles of running a business in Florida.

by Jerry Gabet

I’m really frustrated! I pay a lot of taxes and work very hard in trying to run my business in a profitable and professional manner. Shouldn’t that be enough? Obviously the answer is no. In today’s world it’s critical to be aware of, and active (in some manner) in the legal and political sides of reality.  For this article I’m going to concentrate on one issue that I believe demonstrates this need.

Following a 2004 constitutional amendment, Florida is among 10 states that automatically raise minimum wage rates and Florida attached minimum wage increases to the Consumer Price Index (CPI). This means that every year the minimum wage goes up the same percentage that the CPI rises.  The Employee Tip Credit was also fixed to always be the Florida minimum wage amount minus $3.02. At that time, the minimum wage was $5.25, so that $5.25-$3.02 equaled $2.13 and that amount is the minimum cash wage allowed by the federal government. Unfortunately, due to CPI increases, the 2012 Florida Minimum wage is now set at $7.67 which is a 4.9% increase over 2011. This equates to tipped employee wages for 2012 to equal $7.67 - $3.02 = $4.65 per hour. That’s a 118% increase since 2004.

My problem with this (and yours too, if you have tipped or minimum wage employees) is threefold. First, this is only the beginning as the CPI is expected to increase greatly each year for the next decade. The minimum wage impact from this will most likely be devastating. Secondly, what is the tip credit law doing attached to a minimum wage bill? This makes it very difficult to change, as it takes a constitutional amendment to do so.  The great majority of employees that are affected by tip credit are paid substantially more than minimum wage.  In many cases 3-4 times more. Thirdly, this is big money we’re talking about. My single unit restaurant, with just over $3 million in sales, paid over 46,000 hours in tip credit wages last year. This equates to around $100,000 more in wages than I would pay if my business was in Georgia or any of the other approximately 18 states that still use laws that allow them to pay $2.13 per hour. Our high tip credit wages greatly impact our ability to hire additional staff, even though we’d like to do so. It also hurts our ability to expand the business and to pay our non-tip credit employees a higher wage.  In addition, it contributes to inflation, as I need to pass on some of these costs to the consumer in order to stay solvent. As most of you already know, it’s extremely difficult to be profitable in today’s environment, and this law is a major impediment to profitability. The state does not benefit from this law as there is no state income tax, and it stymies new business growth, thereby hurting tax base growth.

I just don’t get it, something must be done.  A partial list of the current issues we hospitality professionals currently face would include: customers’ household spending decreases and the increasing “discount” mentality, unemployment taxes increasing by a 2-4 time multiple in past two years, liability insurance increases, health insurance cost uncertainty and increasing commodity costs under inflationary pressures. What this all means to me is that we all need to stand up and fight for issues that matter to us most. We just can’t sit around and expect others to do it or we really could end up without our businesses. Please write or call your political representatives and let them know how you feel about the minimum wage being attached to the consumer price index and about the need to change Florida’s treatment of tip credit wages.

If you’re frustrated like I am…….do something! You have the power!

Jerry Gabet is the CEO of Copeland’s of New Orleans, Jacksonville Franchise.