Matt Driscoll: Will the service-charge trend soon hit Tacoma restaurants?

Seattle’s Tom Douglas is a big name in the restaurant business.

And this week he made what felt like a big announcement.

On Tuesday, Douglas revealed that, as of Feb. 1, he will eliminate gratuities at three of his best-known restaurants, replacing traditional tipping with a mandatory 20-percent service charge.

The service charge will then be “redistributed to our team through wages, commissions and benefits” with a goal of providing “greater compensation equity for front of house and back of house,” according to the account by Bethany Jean Clement of The Seattle Times.

Douglas says he expects the rest of his restaurants, of which there are many, to follow suit by the end of March.

All of this is Douglas’ attempt at navigating the tricky post-minimum-wage-hike world in Seattle. The change will allow Douglas to bump his employees’ pay immediately, even faster than the phased-in approach Seattle adopted in 2014.

“We are committed to everyone on our team making $15 or more immediately instead of following the schedule as laid out in the Seattle ordinance regulations,” Douglas promises.

Douglas isn’t the first local restaurateur to try a tip-free approach.

In April, the iconic Ivar’s Salmon House eliminated tips and raised everyone’s pay to $15 an hour. And earlier this month the Northgate location of the RAM Restaurant and Brewery announced the end of tipping along with the introduction of a 19-percent service charge, a course of action very similar to what Douglas is now attempting.

As Stephanie Davenport, the communications advocacy manager for the Washington Restaurant Association, tells me, “It’s definitely a trend.”

Which raises the question: With Tacoma set to up its minimum wage to $10.35 an hour next month, and to reach $12 an hour by Jan. 1, 2018, is this the future for Tacoma diners?

Let’s back up for just a moment, and unpack what Douglas has done.

By adding the mandatory 20-percent “service charge” to the bill, and then giving that extra money straight to his employees, he’s found a way to pay everyone a living wage. That’s undoubtedly a good thing, especially for “back of the house” employees such as dishwashers and cooks, who typically don’t take home the kind of tip money many servers and bartenders do.

However, it’s also not the purely altruistic move some might make it out to be. While state law prohibits tips from being included in an employee’s base wage, it does allow service charges to be counted in this way. By eliminating tips, and using a service charge to reach the mandated $15 minimum wage, Douglas is reworking the conventional restaurant business plan, not going full socialist.

It’s possible some of Douglas’ employees will make less under this new plan than they did under the previous system, though economics suggest the restaurant mogul will still have to pay a top-notch wait staff top-notch money if he hopes to retain them.

All of this fits Douglas’ profile. When it comes to business, he’s a bit of an enigma.

In the past, Douglas been critical of Seattle’s mandatory $15 minimum wage law, wondering aloud how many upstart restaurants it might doom. But he’s also been forward-thinking and sympathetic toward adequately meeting the needs of his many workers. Douglas has offered health care to employees for more than two decades. And in 2013 he raised the minimum wage for cooks and bakers in his kitchens to $15 an hour, and raised the minimum wage for dishwashers to $12 an hour.

Now, Douglas could be part of a burgeoning industrywide shift toward achieving better wage equity among the many jobs that make a restaurant function — all precipitated by mandated minimum wage hikes.

At Indochine Asian Dining Lounge in Tacoma, co-owner Russel Brunton tells me they instituted an 18-percent service charge in June. The move was part of an effort to “provide parity in pay between the front of house and back of house,” Brunton says, as well as in reaction to what felt like an increasing likelihood of a mandated increase to the city’s minimum wage. In addition to the service charge, Indochine decided to maintain a tip line on bills for patrons interested in leaving extra.

While employees accustomed to making most of their income through tips were initially skeptical, so far he says the change has been positive. Brunton tells me front of the house staff now typically makes between $20 and $25 an hour, while back of the house staff brings in $15 to $20.

“Overall, there has been no reduction in front of house wages, general speaking,” he says, adding that employees now have “very consistent earnings.”

“The ability to pay people fairly has been a huge organizational advantage,” Brunton continues. He says the move has “broken down all these huge barriers that typically exist” in the restaurant industry, and that there’s no longer sharp competition between employees jockeying for the more lucrative positions.

Service charges are likely just a starting point for an evolving restaurant industry.

As Davenport puts it: “I think restaurants are going to have to find new, innovative ways to deal with increasing labor costs. That’s just a fact. … This is the first take on that.”

This story was originally published January 13, 2016 at 5:44 AM with the headline "Matt Driscoll: Will the service-charge trend soon hit Tacoma restaurants?."