The Creative, Risky Way Jeju Is Adapting to Higher Costs

One of the most creative aspects of chef Douglas Kim’s West Village Korean ramyun restaurant Jeju Noodle Bar is not in the food, but in the way he compensates his staff. Rather than following the increasingly common, if divisive, policy of ending tipping altogether, Kim instead lets his cooks accept gratuities while paying them the tipped minimum wage. It's the way servers have been paid for decades. However, it's a rare practice for back-of-the-house staff. Based on what Jeju tells Eater, it's working — the three-month-old restaurant's cooks earn well above the industry average as a result.

This type of policy is not necessarily unprecedented; sushi restaurants are a notable example of where chefs can partake of the tip pool. But how precisely this all legally works (or doesn’t) at Jeju is worth examining. It shines a light on the somewhat Byzantine regulatory framework small restaurants must navigate, particularly when they want to try a new way to fairly compensate staffers while staying profitable. It’s all the more important to consider as the state minimum wage rises toward $15.

First, it’s worth clearing up the obvious: Why not just take the safer no tipping route? “We don’t want to upset our customers; we want to give them a reasonable price. This is a casual restaurant,” Kim says in a phone interview.

Casual restaurants, both big and small, have made no tipping work. A number of them are fellow noodle shops: Yuji Ramen, Little Tong, and Ichiran. But still, smaller operators tend to be wary, citing Momofuku Nishi and the movement’s other high-profile failures. No tipping can scare off prospective diners with higher prices, incite waiter defections with the possibility of pay cuts, and cause payroll costs to go through the roof with higher base wages.

Jeju’s strategy is to do away with servers altogether, at least in the traditional sense, and share tips throughout the house. Or as the guest check explains: “Your server tonight is also one of the cooks who prepares the menu dishes. Please note all gratuity is distributed amongst everyone who took part in your service experience.”

Cooks and other staffers, of which there are six or seven, are paid like waiters. They earn the tipped minimum of $7.50 per hour, versus the full, higher minimum of $10.50 per hour (the wage for establishments with 10 or fewer workers). Employees share duties. Everyone from line cooks to the garde manger take turns running food to tables, taking orders, and bussing tables, manager Nancy Yi writes in an email. Managers, including the executive chef and chef de cuisine, are salaried and do not partake in the tip pool. “Ultimately we aren't a big restaurant who's trying to get away with paying their back of house with tips made by front of house,” Yi writes. “Essentially we don't have a front of house staff.”

The benefit of this strategy for Jeju, and other restaurants who might want to follow it, is that the gratuities give cooks some of the benefits of the higher salaries associated with no-tipping policies, without the restaurants taking on the risk of higher prices and skyrocketing payrolls. But here’s the thing: Even restaurants with some of the most standard tipping policies have a hard time fending off wage suits. And Jeju’s policy isn’t quite standard. So the downside of Jeju’s strategy is a higher risk of litigation brought by disgruntled workers or state and federal regulators.

The Sushi Exception

Jeju’s policy isn’t necessarily without precedent. Sushi chefs and teppanyaki chefs, even those who work at restaurants with traditional waiters, can fall into the class of workers who receive tips, according to the U.S. Department of Labor’s field operations manual.

These chefs qualify because they directly interact with the customers, according to the agency. It states that they “are similar to counter personnel because they have direct contact and interact with customers and prepare and serve meals to customers in the bar area or customer tables.” The New York Department of Labor, in a letter published in 2009, offered similar guidance for sushi spots, stating that the key factor for tip sharing eligibility is “personal service rendered to the customer.”

In other words, a sushi chef standing in front of a patron, handing over a custom-sliced piece of toro, might be able to partake of tips. But a chef making Philadelphia rolls at the end of the bar and having that ferried to the dining room on a regular basis might be a less viable candidate.

The rules aren’t necessarily cut-and-dry, particularly with regard to chefs serving customers at tables. Most new high-end sushi and chef’s counter spots go the no-tipping route, but there are, of course, exceptions. When David Bouley opened his newest restaurant Bouley at Home earlier this month, he also opted to have cooks serve food to guests even though gratuity is not included.

The Unforgiving 80/20 Rule

A complicating factor is the 80/20 rule. In a nutshell, it seeks to protect staffers earning the lower tipped minimum by ensuring that they spend at least 80 percent of their time doing work that generates gratuities. (Incidentally, here it’s worth noting that many sushi chefs who partake in tips earn well above the tipped minimum.)

Jeju’s Yi tells Eater that the garde manger upstairs, who prepares the cold appetizers behind a bar, “takes orders like how a sushi cook would,” and would therefore “fall under the counter person exception.” But things get trickier in the downstairs kitchen, where the ramen is made. Yi says those workers are considered, like the upstairs staff, runners and bussers during service. They take turns leaving their stations to serve food and interact with guests.

For Jeju, this is a question of efficiency. Yi says that runners, typically tipped workers, end up being non-customer facing in most restaurants, spending most of their time in the kitchen, waiting. “So instead of a traditional runner, we replaced the waiting of food to where the runner would cook the food themselves with the help of our chefs,” Yi says.

Questions of efficiency, however, sometimes conflict with the rigidities of hospitality law. Prep work, no small matter in ambitious kitchens, can make compliance a pain. Kim says he adheres to the rule by coming in earlier, at 11 a.m., with his chef de cuisine, to ready the restaurant for dinner service, while the rest of his staff, earning the hourly tipped minimum, arrives closer to 4 p.m.

So we’re all good, right? Not so fast.

The 80/20 rule has another requirement that can make life quite difficult. The rule mandates that any work that doesn’t result in gratuities has to actually be related to the tipped job. Filling salt shakers and cleaning tables has generally been considered related work. Doing things like restaurant plumbing is not related and requires payment of the full minimum. For a downstairs runner, Yi says Jeju considers the act of cooking to be related to the service aspect of the job.

But still, the math on the 80/20 rule is unforgiving. Twenty percent of a hypothetical eight hour shift equals one hour and 36 minutes. Cook-runners who come in at 4 p.m., and who spend an hour before service working prep, will have just 36 minutes over the course of an evening to engage in cooking. That’s not a lot of time. Kim admitted that it’s very difficult to comply, especially at prime times. “We are trying our best to be compliant,” Yi says.

Employees in New York who spend more than the allotted period of time on non-tipped work are entitled to the full minimum wage for the entire day. Non-compliance with this rule has been key in driving multi-million dollar wage suits against restaurants.

But Everyone’s Making Money, Right?

One of the most obvious risks of using tips to pay cooks is that their compensation will fluctuate. When business is good, cooks will earn more. But when business goes down, they’ll earn less. Jeju apparently hasn’t had to grapple with the latter problem too much. The restaurant is often full, at least during this reporter’s visits. And Kim says almost all of his cooks are original staff, having joined when Jeju opened earlier this summer.

The average hourly rate for experienced cooks in the city hovers around $16.49, according to New York’s Department of Labor, while that same class of waiters earns $21.37 (post-tips). Yi said during a phone interview that the restaurant’s hourly staffers earn in the low $20 per hour range after tips.

If that’s true, it’s tempting to wonder whether state and local lawmakers should rethink the strictures of the 80/20 rule. Then again, the hospitality industry is one of the country’s single largest violator of wage laws; there’s no shortage of bad operators. The counterargument to changing the rule is whether one might trust a less scrupulous operator to pay their entire staff a sub-minimum wage, putting everyone in the restaurant at risk if tips fall short.

Incidentally, the balance of the 80/20 rule could change, as circuit courts are currently split on its legality, setting up a potential Supreme Court case. It’s also quite possible Jeju’s hand will be forced on the issue if New York ends up eliminating the tipped minimum altogether. In the meantime, hospitality wage suits will continue, labor costs will rise, and owners, operators, and staffers will feel the pinch.

Jeju, for its part, says it hopes the details of its strategy “shed some light on the hardships that operators deal with with these labor law guidelines.” Perhaps some of the other operators sharing tips with cooks will come forward as well.

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Jeju Noodle Bar

679 Greenwich Street, Manhattan, NY 10014 (646) 666-0947 Visit Website