An employee at the Briar Common Brewery + Eatery in Denver pours a beer for a patron on Jan. 7, 2021. (Moe Clark/Colorado Newsline)
Tens of thousands of servers, bartenders and other tipped workers in Denver and Boulder could face a significant pay cut under a bill being advanced by Colorado lawmakers who say the change is necessary to help a struggling restaurant industry.
Members of the House Business Affairs and Labor Committee voted 11-2 in favor of House Bill 25-1208 on Thursday night, after nearly six hours of testimony from supporters and opponents. Democratic state Reps. Bob Marshall of Highlands Ranch and Sheila Lieder of Littleton were the only “no” votes.
The bill would dramatically increase the “tip offset” — the dollar amount that employers can subtract from the minimum wage paid to tipped workers, as long as tips make up the difference — in cities and counties that have raised their local minimum wages above the statewide level. For a tipped restaurant employee in Denver, the minimum wage would fall from $15.79 to $11.79 per hour; at 40 hours a week, that could mean over $7,000 a year in lost pay.
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Restaurant owners and business groups, who have lobbied for the change for years, say that high labor costs, combined with pandemic disruptions and inflationary pressures, have caused hundreds of local restaurants to close their doors and pushed many others to the brink.
“Labor costs, which used to be 25 to 30% of restaurants’ costs, are now 50 to 60%,” Sonia Riggs, president of the Colorado Restaurant Association, told the committee. “Menu prices can’t keep pace or consumers stop dining out. It’s like death by a thousand increases.”
Workers, labor unions and progressive groups, however, say the bill is a misguided, and potentially counterproductive, effort to help an industry that faces a variety of economic headwinds. The average restaurant server in the Denver metro area makes a little over $39,000 annually including tips, according to Bureau of Labor Statistics data. HB-1208’s “huge overnight pay cut” for those workers, said Caroline Nutter of the Colorado Fiscal Institute, attempts to balance the industry’s books on the backs of its most vulnerable employees.
“We need to consider what slashing wages by almost $140 million a year might do to consumption, demand and revenue,” Nutter said. “There are ways to address the issues that restaurants are facing. There must be a way to do this with workers at the table and without starting (by) cutting the wages of some of the lowest-paid workers in the state.”
The state’s labor department says there are roughly 21,000 tipped employees who could be affected by the change. No amendments to the bill were made in Thursday’s committee hearing, though several Democrats on the panel said they expected changes at a later stage. State Rep. Steven Woodrow, a Denver Democrat and one of the bill’s sponsors, said he would continue talks with opponents, but something must be done to help an industry in “crisis.”
”We have ideas on how we can make the policy more labor-friendly,” Woodrow said. “We are looking for partners on the other side to have those conversations with. At this point, we’ve run up against fairly stiff opposition.”
Collision course
Two major changes to Colorado’s wage laws enacted over the last 20 years set state and local policymakers on a collision course with the restaurant industry.
In 2006, Colorado voters approved a constitutional amendment to raise the statewide minimum wage and adjust it annually based on inflation. The measure also fixed the state’s tip offset at $3.02 per hour. Over time, the flat $3.02 tip credit has shrunk to a smaller and smaller percentage of the overall minimum wage — from over 40% in 2007, when the minimum wage was $6.85 an hour, to just 20% today, with the minimum wage set at $14.81.
And in 2019, Democratic lawmakers repealed a preemption law that banned cities and counties from setting their own, higher minimum wages. A handful of local jurisdictions — the cities of Denver, Boulder and Edgewater, along with unincorporated Boulder County — have done so.
If passed, by October of this year, HB-1208 would effectively exempt tipped workers from local minimum wage hikes, by requiring local governments to increase their tip credits by an amount equal to the difference between the local and state minimum wages. For example, in Denver, which has raised its minimum wage to $4.00 above the state’s level, the tip credit would rise to $7.02. After one year, cities could raise or lower their tip credits by no more than 50 cents annually, within a certain range.
HB-1208 has divided local elected officials in cities with higher minimum wages. Denver City Council has taken a position against the bill, and several council members testified in opposition in Thursday’s hearing.
“This is one of the most flawed pieces of legislation I’ve ever seen come through this building, and I don’t say that lightly,” Denver City Council Member At-Large Sarah Parady told lawmakers. “I am astounded, and as a local legislator insulted, by the idea that the state of Colorado would force its biggest and most expensive city to directly cut worker pay by thousands of dollars per year.”
But Mayor Mike Johnston supports the change, said Dominick Moreno, a former state senator and the mayor’s deputy chief of staff for strategy. Moreno was a sponsor of the 2019 legislation allowing local governments to raise their minimum wage. The tip credit issue should have been settled at the time, he said, but the sides weren’t able to come to an agreement.
“I think everyone understood at that time that we were kicking the can down the road, and that eventually something would need to be done to address this issue,” Moreno said. “I think now you’re seeing quite an untenable situation for the restaurant community.”
Marshall took issue with the abrupt wage cuts the bill would force, floating the possibility of a “glide path” for local governments to comply with.
”This issue has been a long in coming, over eight years, piece by piece,” he said. “And yet we’re trying to cram down the workers in one year.”
‘The sky is not falling’
While there’s little doubt that restaurants have faced a variety of challenges in recent years, some opponents of HB-1208 dispute the prevailing narrative from bill sponsors and industry groups that Colorado’s dining scene is in free fall.
“The restaurant industry in Denver isn’t dying,” Matthew Fritz-Mauer, director of the labor division at the Denver Auditor’s Office, told lawmakers. “The sky is not falling. There is no reliable empirical support for this claim.”
A widely circulated statistic showing a 22% decline in the number of restaurant licenses in Denver since 2022, Fritz-Mauer said, is based on “incomplete data” and doesn’t account for a significant change in the city’s licensing system in 2023. He cited BLS data showing stable employment figures for the industry as a whole.
Moreno acknowledged that changes to licensing procedures “may have disrupted the numbers a little bit,” but said the mayor’s office still finds the figures “quite concerning.” Other proponents of HB-1208 said the BLS data, which includes workers in commissaries used by food trucks, caterers and online-only “ghost kitchens,” doesn’t accurately reflect the health of the hospitality industry.
Democratic state Rep. Alex Valdez of Denver, another HB-1208 sponsor, cited the recent closure of familiar spots around the state Capitol as proof that the bill is necessary.
“It’s astounding to me that we had testimony from the auditor’s office that there’s no problem,” Valdez said. “Everyone in Colorado can see the problem. Everyone in Denver can see the problem. It’s a major problem.”
Analysts say per-person restaurant visits have steadily declined from their peak in the 1990s, part of a broader trend towards American adults spending more of their time alone or at home. The COVID-19 pandemic accelerated those trends, and while revenues and employment in the foodservice sector at large have rebounded to pre-pandemic levels, that bounceback has been achieved through a shift away from full-service, independent restaurants towards large chains and expanded takeout and delivery service.
Dozens of local restaurant owners testified in support of HB-1208 on Thursday. Many of them said that changing the tipped wage would help their bottom lines, but not by much.
“It’s everything. It’s rent, cost of goods, labor,” said Jeff Osaka, a Denver restauranteur who said he’s been forced to close one of his two remaining restaurants, Osaka Ramen. “So this bill would help a fraction of that. This is a good stepping stone.”
But Jesse Thornton, an airport bartender and member of foodservice union Unite Here Local 23, said that after decades of extremely low pay, minimum wage hikes over the last decade have finally meant “real wages” for restaurant employees for the first time. Rolling back those gains would be “devastating” for workers who live paycheck to paycheck, he said.
“Restaurant owners would profit from this bill, and working Coloradans would not,” said Thornton. “Tipped workers don’t get raises unless the minimum wage goes up. That’s a fact of the industry.”
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