Pearl in Petaluma has banned tipping in favor of living wage

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As Annette Yang and her partner Brian Leitner made plans to open Pearl earlier this year, they finally had the right size restaurant to implement a shared philosophy: that tipping for service is practice that should end.

“We knew we were going to pay everyone, front of the house and back of the house, a living wage,” Yang said. “This is not our first restaurant in life, but it is the first where we considered this.”

For her, it’s about equality. Front of the house workers, who are tipped, traditionally make higher wages than the kitchen staff. Plus, it shifts the burden of the restaurant’s success or failure to the owners, which Yang believes is where it belongs.

“On really busy days, it works out for us. On really slow days, it can feel painful,” she said of the policy. But, she points out, that is how most businesses operate. If a retail shop or mechanic is slow, employees are still paid the same. “The onus of the ups and downs is on the owner, which is fair.”

Unlike some no-tip restaurants, Pearl does not add an automatic service charge to bills. Instead, dishes are priced in a way that will cover the business expenses, including employee salaries and benefits. Prices are still in line with other fine-dining establishments in Petaluma, with appetizers costing $11 to $14, and entrees at $16 to $21.

“It’s not perfect,” Yang said with a big laugh. “It’s a conversation we have every day. Some things we just can’t price any higher, and maybe we take a loss on that.”

Diners, by and large, have been supportive of the no-tipping policy. Although they usually have questions, which is why either Yang or Leitner are almost always on hand at the restaurant.

“It’s always a positive conversation,” Yang said of her chats about the policy. “People love the idea of paying a living wage. They also like that they don’t have to think about it, there’s no tip line.”

Internationally, tipping is uncommon in the developed world. Most of Western Europe has moved away from the practice. The standard in other nations is usually a 5 to 10 percent tip, America is the only country where a 15 to 20 percent gratuity is expected.

Famed restaurateurs like Danny Meyer have cited the racist history associated with our country’s tipping practices as their reason to abandon the tradition. While restaurant tips have existed in some form since the days of serfs, it exploded in popularity following the end of the Civil War. According to the Institute for Policy Studies, “For white-owned businesses, adopting the tip system was a way to avoid having to pay salaries to newly freed slaves.” The article continued, “…the tip system not only harms employees, but patrons as well. Tipping shifts the responsibility of paying employees from owners to customers.”

Even today, customers are expected to pay the bulk of a server’s salary in most of the country. California is one of just seven states where tipped employees must be paid a full minimum wage. Under the Fair Labor Standards Act, restaurants can pay tipped employees as little as $2.13 an hour, well below the federal minimum wage of $7.25 — a practice that is common in more than 20 states.

Pearl’s policy isn’t for every employee. “This job appeals to a very specific type of front of house person,” Yang said. “It has to be someone who wants stability in their paycheck.”

She said employee salaries are determined by merit, a combination of attitude, performance and experience. “You are paid based on all the factors that are normally considered.”

She doesn’t buy the argument that taking away tips also takes away an employee’s incentive to provide good service, and science seems to agree. Studies at Oxford and Cornell found that the quality of service provided is only loosely correlated with the size of a servers tip. A much more significant driver of tip size is how attractive the customer finds a server, according to the International Journal of Hospitality Management.

Some major restaurants, including Meyer’s Union Square Hospitality Group, attempted to ban tipping then went back to it after experiencing a dip in business. Yang said that won’t happen at Pearl. The owners are committed to a living wage for employees, even if it means changing up its business practices.

“We hope our corner of Petaluma can show that it works,” Yang said. “We feel really strongly about this and are 100 percent confident it is the right thing to do.”

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