Effort to save restaurants by reducing base pay for tipped workers in Denver, Boulder clears first Colorado Capitol hurdle
After more than five hours of testimony on why so many independent restaurants are faltering, a Colorado House committee served up bipartisan approval Thursday night on a bill that could reduce a restaurant’s expenses but lower wages for thousands of tipped workers in Denver, Edgewater and Boulder County.
Dubbed the Restaurant Relief Act by the restaurant industry, House Bill 1208 passed out of its first committee on an 11-2 vote. Democratic Reps. Sheila Lieder from Littleton and Bob Marshall from Highlands Ranch voted against the bill, citing their support of workers and the cities that had adopted the higher wages in the first place.
“There is definitely a problem here, especially for small businesses. But I ran to be a state rep to help workers and seniors,” Lieder said. “When I hear testimony that not all options that Colorado lawmakers have already passed are being used (and) instead they run here to right away cut the workers wages all at once … I just can’t support cutting wages for workers when they’re already hurting as well.”
The bill seeks to tackle tipped wages, the fastest-growing minimum wage in the state. In the past decade, minimum wages in Colorado, where the statewide minimum wage is much higher than the federal minimum and local governments can hike the base even more, rose more than 100%. But tipped wages rose even faster.
In Denver, the tipped wage, which has added an average of $1 per hour per worker per year for the past decade, is up 203%, to $15.79 an hour.
The bill would increase the portion of hourly pay employers don’t have to cover in areas where minimum wage is higher than the state. Called a “tipped credit,” this offset has been at $3.02 for decades. Instead of earning the state’s minimum wage of $14.81 an hour, tipped workers make $11.79 and keep all their tips.
But in communities like Denver, Boulder County and Edgewater that have adopted a higher minimum wage than the state, the change would add the difference between the state and local minimums to the tipped credit. So, in Denver, where the hourly minimum is $18.81, and tipped workers currently make $15.79, the bill would reduce tipped pay by $4 — $7.02 less than Denver’s minimum wage. If workers don’t earn at least $7.02 in tips per hour, their employers cover the rest to get it to the city’s minimum wage.
Either way, tipped workers in parts of the state where the minimum wage has been increased above the statewide base will make the local minimum wage, but under the proposal, they would have to offset it by as much as $4 of their own tips in areas like Denver. Boulder workers would see the smallest hourly reduction, at 76 cents.
In areas that pay the state minimum, there is no change. The bill would flatten all tipped workers wages in Colorado to the existing state tipped-minimum wage.
Restaurant owners said the savings of tens of thousands of dollars or more, depending on the restaurant’s size, is one small piece of desperately needed relief after years of rising costs for food, rent, insurance and more. But labor costs have grown faster than everything else.
“As you’ve all heard today, there’s been a significant increase in labor costs as a result of these wage policy increases. Many restaurants, myself included, have had to reduce staff hours, cut the number of employees or even close their doors entirely,” Jenn Mena-Wenstrom, owner of Super Mega Bien with her husband and executive chef Victor Mena, testified Thursday before the House Business Affairs and Labor Committee.
The couple worked at the restaurant and then bought it in 2023. Just because the tip credit is $3.02 or $7 doesn’t mean restaurant owners can and will always take the max. But the larger amount provides more flexibility, especially for small restaurants, so it can adjust as minimum wages increase annually.
“We’re tiny but I want to make sure that my whole team … have the same living (wage) and I guarantee you they don’t and I can’t give them that if I don’t have the flexibility,” Mena-Wenstrom said. “We don’t have to take the $7 (but) If we don’t have the flexibility, we can’t change anything.”
How the tip credit got stuck
The roughly 180 people who signed up to testify Thursday provided an odd mix that made it difficult to predict the outcome of the vote.
Several tipped-workers opposed the bill. A few workers supported it. Restaurant owners had near-unified support. But at least one restaurant owner opposed it.
A Boulder City Council member opposed it. Another member supported it. The majority of Denver City Council opposed it. Denver Mayor Mike Johnston supports it.
Former Senate Majority Leader Dominick Moreno, a Democrat who now works as Johnston’s chief of staff, added another twist. He was a lead sponsor of the 2019 minimum wage bill that let local governments adopt their own minimum wage. But at the time, sponsors chose to freeze the tipped credit at $3.02.
“The decision at the time was don’t do any more damage,” Moreno said. “I think everyone understood at the time that we were kicking the can down the road. … Hopefully you all live long enough to see the consequences of the legislation you pass. … And so I think now you’re seeing quite an untenable situation for the restaurant community.”
Some committee members who voted in favor of the bill appreciated hearing this. Rep. William Lindstedt, a Broomfield Democrat, said that when he previously served on Broomfield’s City Council, they rejected a minimum wage increase because of the pushback from restaurants on tipped wages.
“We have to fix it and if we don’t fix it, we’re going to see more consolidation, less competition and less small businesses growing in our state and in our city,” Lindstedt said. “Personally, I’m a ‘yes’ on this bill because my dad owned a bar and the bar went out of business. And it wreaked havoc on our family. When these small businesses go under, it affects kids, it affects the owners, it affects employees. It affects neighborhoods. This trajectory we’re on is unacceptable.”
The reality of running a restaurant
Thoa Nguyen, chef-owner of Aurora-based Bánh & Butter Bakery Café who competed on Food Network’s Holiday Baking Championship in 2023, testified Thursday she pays herself less than everyone else on the team and is searching for a second part-time job.
Lauren Roberts, who owns City, O’City and Watercourse Foods with her mother, had employed 175 people pre-COVID and offered above-industry wages, plus other perks like mental health resources.
“Today, we have lost nearly 90 of those jobs. We are paying lower wages than what we were able to do. We have been decimated by inflation, increases in labor costs and impacts of work from home,” she said. “We went from offering legitimate careers to barely being able to survive.”
Two-minute testimony after two-minute testimony had restaurant owners, chefs and even some employees speaking in support of reducing tipped-wages and sharing how tough it is to stick with something they love.
“I want us to survive,” said Eden Parker, who’s been a server at Blue Bonnet Cafe in Denver for almost 30 years. “Don’t get me wrong, I work to make money and no one wants to see their wages go down. However, even on the individual side, I think this bill can help us all make money. To contend with the payroll increases this year, our business decided to close on Mondays. This meant that all staff, front and bank of the house, lost at least one shift a week.”
The restaurant cut support positions, including hosts, bussers and expeditors. And when it’s not busy, the restaurant now closes early. “All of this meant that we servers were working harder on our shorter shifts with fewer hours and likely giving worse service to our customers,” Parker said.
The proposed bill would affect 21,000 tipped workers in the state and lower their pay by an average of $2.50 an hour or $5,000 a year, according to Colorado’s Department of Labor and Employment.
It’s still a pay cut, say worker advocates
A number of other tipped workers testified against the bill, though several didn’t show up when their name was called. They couldn’t stay that long and had to get to work because “they’re having to work multiple jobs with the very low wages they’re provided, they cannot stay all day and all night in a hearing,” said Saru Jayaraman, president of worker advocacy group One Fair Wage, which opposes the bill and advocates for minimum wage for all workers, plus tips.
Jesse Thornton, an airport bartender and a Unite Here steward, said he’s worked a tipped minimum wage for most of his life, starting in the mid-1990s when he made $2.13 an hour.
“I now make $22 an hour as a bartender in a union shop at the airport,” he said. “The advances in the minimum wage for tipped employees that we’ve seen since 2010 mean that some people who work for tips will actually see real wages on their paychecks. … Any changes to the tipped minimum wage will take money out of workers’ pockets. A loss of $200 a paycheck would be devastating for some people.”
Nina DiSalvo, an attorney who defends workers at Towards Justice, said she opposed the bill because it reduces the wage of workers. But the tipped wage isn’t solely to blame for restaurant woes. Massive corporations have created near-monopolies on food distribution that “impose pricing models that favor large corporate chains over small restaurants,” she said. Companies like DoorDash charge high rates for delivery when restaurants have limited choices. Food prices are undermined by big business that dominates with near-monopolistic power.
“Pitting workers against restaurants won’t help, because labor costs are not the problem. Instead, policymakers also focus on the real problems confronting our state’s restaurant industries, outsized monopoly, monopsony, power and corporate control,” she said. “In other words, restaurants are confronting real challenges but this bill fails to address them.”
But, Rep. Max Brooks, a Republican from Douglas County, said the bill does provide a fix for local businesses that are struggling.
“We have overregulated small, medium businesses absolutely to death. Restaurants are a part of that,” said Brooks, who voted in favor. “I get that food costs, rent, everything across the board. This is not meant to be a fix all but it’s meant to be something that can provide a fix. And I think that’s very important because we did create it. We need to solve some of these problems one little piece at a time.”
The bill still now heads to the House Finance Committee.