Darden Defends Pay Practices

The debate over the minimum wage and restaurant server pay has played out on newspaper opinion pages in recent weeks, with Darden Restaurants Inc. in the crosshairs.

Scott Klinger, an associate fellow at the Institute for Policy Studies, a progressive think tank in Washington, D.C., wrote an opinion piece titled “Why Your Waiter Hasn’t Gotten a Raise in 22 Years,” which was distributed by the McClatchy-Tribune News Service earlier this month and published in newspapers like the Miami Herald.

The article, which specifically mentions Darden, focuses on the sub-minimum wage of $2.13 per hour that restaurant owners can pay tipped employees in some states, which Klinger notes has not increased for 22 years.

The author highlights sales increases at Darden’s restaurants over the past 17 years and CEO Clarence Otis, Jr.’s take-home pay of $6.4 million last year, which, Klinger notes, works out to about $2,116 per hour, assuming a 60-hour work week.

In 1991, when the tipped wage rate was frozen, “Darden reported $2.6 million in sales per restaurant. By 2013, sales per restaurant increased 52 percent to $4 million. During the same period, the hourly pay of much of Darden’s wait staff increased by, well, zero,” Klinger writes. “Only employees in Darden’s fine-dining Capital Grille restaurant chain and those in states that have adopted a tipped minimum wage that is higher than the federal minimum earn more.”

Klinger’s article was written before Darden revealed $25 million in cost-cutting measures last week that will eliminate 85 staff positions, an announcement that followed the report of a 36.6-percent decline in profit and the continued decline in same-store sales for the company’s core Olive Garden and Red Lobster brands.

It also came before California Gov. Jerry Brown signed legislation on Wednesday that will raise the state’s minimum wage to $10 per hour by 2016. Currently, the minimum wage in California is $8 an hour, but the legislation was buoyed in part by protests across the country in which quick-service restaurant workers called for a $15 an hour wage.

Federal lawmakers are also weighing a minimum wage hike. Momentum is building in Congress to raise the federal minimum wage to $10.10 per hour and to peg the tipped wage to 70 percent of that level, or $7.07 per hour, Klinger wrote. The push has been opposed by the National Restaurant Association and restaurant companies like Darden.

In response, Samir Gupte, Darden’s senior vice president of culture, wrote a letter to McClatchy’s editor, which was also published by several newspapers. The letter counters Klinger’s argument, saying it doesn’t paint a true picture of the restaurant industry or Darden’s pay practices.

“The accessibility of the American Dream may be in question in our country as a whole,” he wrote, “but it is alive and well in the restaurant industry and is a passion and mission for us at Darden.”

For starters, Gupte said, “No one makes $2.13 an hour. It is a popular exaggeration and terribly misleading. Across all eight of our restaurant concepts, the average income for hourly employees ranges from $13 to $21 per hour.”

Rich Jeffers, a Darden spokesman, said Klinger’s argument does not take into account the fact that if tips do not bring a server’s pay up to the state minimum wage at least, employers must make up the difference.

In addition, seven states do not allow the tip credit, including California. In those states, tipped employees must be paid the minimum wage at least and receive tips on top of that. And many states that do allow a tip credit have a tipped wage rate that is higher than the federal minimum of $2.13, according to the U.S. Department of Labor.

Only about 20 percent of hourly employees within the Darden system are paid $2.13 per hour before tips, said Jeffers.

Gupte noted that many Darden employees are paid more than minimum wage. The hourly income of bussers, for example, often an entry-level job, is more than $11 per hour, which is higher than the federal minimum wage of $7.25.

Gupte also noted the opportunities employees have to climb the ladder. More than half of restaurant managers are promoted from hourly positions, he argued, and nearly 100 percent of general managers and managing partners are internal promotions.

“Darden provides our employees a well-trodden path from an entry-level hourly position, with or without a college degree, to leadership roles,” he wrote.

“We understand we are not perfect — and we are always looking to get better,” Gupte concluded. “All we ask is that our critics make an effort to learn and understand the entire story instead of simply bending numbers and using half truths.”