While some business owners looked forward with trepidation to the city’s recent mandate of sick time accrual for nearly all Minneapolis employees, Dan Swenson-Klatt has three years of experience that proves it works for his business.
And while other small entrepreneurs fear the impact of $10.25 hourly wage that kicks in next July for businesses with fewer than 100 employees — a first step toward an eventual $15 per hour — the employees at Swenson-Klatt’s Butter Bakery Cafe already average $14.60, with the lowest paid earning $13.50.
The Working Families Agenda outlined in 2014 by a coalition of labor, community and religious groups is taking hold at Butter thanks mainly to Swenson-Klatt’s vision of the kind of business he seeks to run. In his 13th year in business, now at Nicollet & 37th, the former teacher-turned-entrepreneur envisions his eatery as a community gathering place that sources its raw inputs from sustainably run farms and treats employees fairly.
But he makes those decisions with a careful eye on cash flow. When the sick leave proposal emerged, he decided the business was healthy enough to try it on his own, without waiting for a city mandate.
He used the same accrual formula that was incorporated in the city ordinance: one hour of leave accrual for every 30 hours worked, up to a 48-hour maximum. Swenson-Klatt allows unused time to carry over but limits the time’s use to 48 hours in a calendar year.
In the first year, a half-dozen of the café’s 20 or so employees used their time off, a use that expanded to most workers in subsequent years. Swenson-Klatt allows employs to dip into this paid-time-off bank not just for illness, but also for a day off or family needs.
“All of a sudden I realized that I had created a really valuable benefit for them,” he said over a cup of tea.
He sees several benefits. First, employees are less likely to show up sick for work at a job that involves preparing and serving food. Second, it encourages longevity among his workforce, saving the hassle of training new hires and strengthening worker buy-in to the shop. That’s important to a boss who likes to cultivate a family feeling in his workplace.
All that for a cost he estimates at 2 percent of payroll. That’s the extra cost of keeping a worker on payroll while they’re not working and scheduling someone to cover for the missing worker.
That’s not insignificant to an owner who just last April started paying himself a regular paycheck from the business he’d nurtured for a dozen years. Although he felt the business was stable enough to absorb that cost, he still sometimes defers his check for cash-flow reasons.
The decision to change his pay practices went through a more complicated evolution. His is mainly a business at which beverages and baked goods are sold at a counter, with fresh-cooked meals delivered to tables. The only tipping was at the counter tip jar. But that led to a pay differential between those at the counter and those preparing food, something that made some workers uncomfortable. Some front of house staff were making as much as $16–$20 hourly during certain shifts.
His has literally been a business where family members helped out, but he also strives for that feeling among the staff.
“There was this discomfort of ‘Well, I shouldn’t be making that much more than anyone else,’” he said.
So he put the issue out to staff, and some workers devised a formula to equalize things. That cut several dollars an hour off of front-counter wages. A couple people left for waitstaff jobs elsewhere. But the rest said $15 hourly counting equalized tips would work. Tips were shared according to who was working a shift.
This brought the range from the highest to the lowest compensated worker within about a dollar an hour, giving Swenson-Klatt cost data to make menu price changes.
But there was some extra calculation to divide tips for each shift. And Swenson-Klatt is among those discomfited by the entire ethos of tipping, with its implication of a power relationship and the potential for harassment. So he sat down with staff again and then devised a system that pays for experience and the type of work done.
He calculated a worker’s average compensation on an hourly basis over a four-month period. Some workers had earned more because they had the seniority to sign up for higher-tip shifts. He then pledged to maintain that level of compensation even without tips, regardless of business fluctuations.
The new no-tip policy started last April. The wage range runs $13.50–$17 hourly. That means that Butter will be able to absorb the first step next year of the city mandate toward $15 an hour. His $14.60 per hour average means he’ll need to make only modest adjustments to hit the $15 level that other small businesses must meet by mid-2024, with big employers facing a 2022 compliance date.
“I have staff who feel real secure and can budget, or who could say I could afford fewer hours to I need more hours,” Swenson-Klatt said. The business is within 3-4 percent of what it needs to cover the guaranteed wage costs, so he nudged a few prices.
Meanwhile, Swenson-Klatt spent hours at the Legislature fighting a bill that would have pre-empted local wage and sick hour ordinances, which was vetoed by Gov. Mark Dayton.
“There is a small group of us who have a desire to see general equity within our industry,” he said. But he hears the fears of other restaurateurs. “They have a fear I feel too that it’s going to be real hard to keep the cash flow going, to keep the doors open.”
That’s balanced by public feedback, such as he experienced when he went to all-compostable materials, in advance of the industry.
“I have folks who come in, and say, ‘Thanks for being out front,’” he said.