‘It Was Supposed to Level the Playing Field. It Did Not Make Things Equal or Equitable.’

For the most part, Jordan Smith’s Instagram feed contains neat overhead shots of baked goods and home-cooked meals. Sometimes it’s a big bowl of puttanesca or a honey cake gilded with lemon curd and sunchoke flowers. Other times it’s a wreath of green goddess biscuits, developed for King Arthur Baking as an homage to the city of San Francisco where the dressing was invented — the city Smith called home for four years before moving to New York.

But on Sunday, August 20, the same day San Francisco restaurant Automat announced its impending closure, Smith took to social media to post something other than photos of gorgeous desserts and dinners. In a series of three Instagram stories, he wrote about his experience working at the restaurant — specifically about Automat’s mandatory 20 percent service fee. “If you see a restaurant charging a ‘cost of living,’ ‘equal pay,’ ‘mandatory service fee’ like the 20 percent this restaurant did, be suspicious,” Smith wrote. “It’s possible the back of house teams aren’t seeing much of that money.”

Smith, along with five other former workers at the now-closed Automat, a casual restaurant from the owners of two-Michelin-starred Lazy Bear, say they were told the restaurant’s mandatory 20 percent service fee would help the restaurant break out of the traditional pay model, which typically favors tipped front-of-house staff. But that’s not what the former employees say actually happened. Workers from both the back and front of house say the way restaurant owners and managers split up the fee among workers was confusing — and only continued to put the majority of the money in the pockets of front-of-house staff. The conflict underscores the challenges restaurant owners continue to face as they turn to mandatory service fees as a workaround for an American tipping system rooted in racial exploitation.

“I think they were allowed to hide behind the 20 percent service charge,” Smith told Eater SF in an interview the week of Automat’s closure. “I think [the owners] genuinely thought, ‘We’re on the good team. We’re helping make restaurants a better place.’ But from my experience, it was mostly just a facade.”

Smith joined the Automat team in January 2022, not long after the hotly anticipated restaurant opened on the corner of McAllister and Baker streets in the NoPa neighborhood. The experienced baker says he wanted to join the team in part because of the company’s reputation as a good place to work. Smith says he was told during the hiring process that the 20 percent service charge to all customers on every order was how the restaurant achieved a more equitable pay structure. “It was supposed to level the playing field,” Smith says. “It did not make things equal or equitable.”

Former staff members who spoke to Eater SF, as well as Automat co-owner David Barzelay and director of operations Colleen Booth, who are also partners in Lazy Bear and cocktail bar True Laurel, agreed a conflict around the restaurant’s service fee came to a head in June 2022. That’s when much of the Automat staff became aware of a Google spreadsheet that tracked how the service was divided on an individual basis. The sheet, the owners say, was supposed to be shared with the restaurant’s staff on a biweekly basis, every pay period. And even though the restaurant’s owners and managers say they never intended to hide that information from staff, they acknowledge that for a time, the spreadsheet wasn’t being shared as transparently as it should have been.

A copy of the spreadsheet, which was shared with Eater SF, shows that throughout the first half of 2022, the back-of-house team typically received between 12 and 20 percent of the total distributed tip pool, which included money brought in both by the service fee and as additional cash and credit card tips.

In order to determine each employee’s tip-out amount, workers were awarded a certain number of “shares,” which the owners say was determined by management and reflected a number of factors, including the staff member’s experience level and tenure at the restaurant. The employee’s number of shares — typically between 50 and 80 for back-of-house staff and between 70 and 100 for front-of-house staff — would then be multiplied by the hours they worked during the pay period. But the value of those shares varied widely between front and back of house. In most months during 2022, front-of-house shares were valued around 35 cents each. Back-of-house shares, in comparison, were worth between 3 and 5 cents each.

That means that in the pay period from May 16 to May 31, for example, 11 front-of-house employees split about $14,500 in tips, or about 86 percent of the total distributed tip pool. One employee, who worked a total of 60 hours over two weeks, received more than $1,800. Meanwhile, 14 back-of-house employees split a $2,263.99 pool, about 14 percent of the total distributed tip pool. The largest tip out for a back-of-house employee was about $224 for an employee who worked more than 96 hours during the pay period.

Lemuel Ramos worked in the kitchen at Automat, joining the opening team as a p.m. line cook and continuing to work there until June 2022. He says he was similarly drawn to the job in part because of the service fee and the promise of pay equity between staff that came with it. Even without factoring in the service fee, the hourly pay at Automat was “slightly above” what he’d been paid at other San Francisco restaurants — especially considering the expectations and stress level, which were lower at the more casual restaurant than at some of the fine dining establishments where he’d worked previously.

Even so, he says the disparity between the front and back of house tip amounts received from the fee was upsetting. With San Francisco being one of the most expensive cities in America, even the higher hourly wage at Automat and the extra money from the service fee weren’t enough for him to feel financially secure. “We could pay our rent and maybe go buy a nice purchase or go out to a nice dinner every now and then,” he says, “but it still didn’t leave room for disposable income or a good safety net.”

It wasn’t just the restaurant’s back-of-house staff members who were upset by the way the service fee was being split. Two baristas (who declined to have their names published for fear of retaliation) say the system favored those in the front of house, which felt unfair considering how hard they saw their colleagues working behind the scenes. “I was thankful at that time to be making a livable wage,” one former barista says. “It was important to me to keep the job to continue earning money and be able to save, but morally, it was really upsetting to me.”

Barzelay and Booth say they were aware some Automat staff were unhappy with the way the service fee was split between the front and back of house. But the restaurant’s system was modeled after the systems used at their other two businesses, Lazy Bear and True Laurel; the owners say neither location’s staff has raised any major issues with the service fee distribution system.

Lazy Bear, the group’s most famous and high-end restaurant, has charged a mandatory 20 percent service fee, split between front and back of house, since its debut in 2014. “In large part, we led the charge here at Lazy Bear,” Barzelay says, referencing the fact that even almost a decade later, restaurant service fees remain somewhat controversial with both customers and workers. But unlike at Automat, which was open all day and offered two completely separate menus, one for breakfast and lunch and another for dinner, Lazy Bear and True Laurel operate on more limited schedules. In Lazy Bear’s case, there’s essentially only one shift — dinner service — which means most staff work roughly the same hours, making it far less complicated to split tips. At True Laurel, the service fee actually makes it more appealing for staff to pick up weekend brunch shifts, Booth notes, since the service fee means workers don’t feel like they’re being penalized for working what’s often a slower service.

Even with the pushback from staff at Automat, both Barzelay and Booth say they’re committed to the idea of a service fee that allows them to put even just a few more dollars into the pockets of their kitchen staff, on top of their hourly wage. If there hadn’t been a period where staff were “in the dark,” in Barzelay’s words, about how the service fee was being distributed, there wouldn’t have been an issue. They say part of the problem is that they’re trying to carve out a different path to achieve more pay equity in a larger system that’s built on the foundation of tipping, an economic byproduct of racism and classism. For example, Barzelay points out, the restaurant has to pay taxes on the 20 percent mandatory service fee it charges customers — which is not the case with optional tips. “We are strongly in favor of abolishing tipping — or at least, I am,” Barzelay says.

The nationwide battle over the tipped minimum wage is only just heating up, and as more states look at banning the arguably discriminatory practice, business owners will likely continue to look to service fees as a way to compensate staff. Barzelay and Booth say they still believe it’s the best option for their businesses. “It’s easier for us to not do it,” Barzelay says. “But we choose to do it because we think it works better.”

Correction: September 20, 2023, 9:05 a.m. This article was corrected to reflect that Colleen Booth was Automat’s director of operations.