Last month, the U.S. District Court for the District of Hawaii certified a class of plaintiffs in an action seeking relief against Hilton Hotels Corporation (n/k/a Hilton Worldwide, Inc.) and its subsidiary Waldorf=Astoria Management LLC, which manages the Grand Wailea Resort, on Maui. The certified class consists of “all non-managerial food and beverage service employees who, from January 31, 2006 to the present, have worked at banquets, functions, other events, and small parties, where a service charge was imposed and where a party of that service charge was kept by the Defendants or management without adequate disclosure to the customers.” This description of the class summarizes the underlying allegation being made by its representatives. The case is Wadsworth v. KSL Grand Wailea Resort, Inc., D. Haw. Case No. 08-00527.
Section 481B-14 of the Hawaii Revised Statutes states, in its entirety, “Any hotel or restaurant that applies a service charge for the sale of food or beverage services shall distribute the service charge directly to its employees as tip income or clearly disclose to the purchaser of the services that the service charge is being used to pay for costs or expenses other than wages and tips of employees.”
Wadsworth is one of at least seven federal cases in Hawaii, all filed between November 2008 and January 2009, that allege violations of this statute. In five of these cases, plaintiffs have filed motions to certify classes. Meanwhile, classes have been certified in at least two similar cases in Hawaii state courts.
Wadsworth is only the second case in which the U.S. District Court for the District of Hawaii has ruled on a motion for certification of a class alleging violation of H.R.S. § 481B-14. The first ruling was made this May in Villon v. Marriott Hotel Servs. Inc., D. Haw. Case No. 08-00529. In that case, the court similarly certified a class of “all non-managerial food and beverage service employees, who, from July 30, 2004 to the present, have worked at banquets, functions, events, and small parties, or provided room services, where a service charge was imposed and where a part of that service charge was kept by the [Wailea Marriott Resort] or management without adequate disclosure to customers.” A May 31, 2011 opinion of the District Court certifying the class in Villon includes a lengthy discussion of the history of these Hawaii class actions, as well as class actions brought in Massachusetts under a similar statute in that state. The opinion explains that in yet another of the five class actions pending in the District Court in Hawaii, the court certified to the Hawaii Supreme Court the issue of whether employees had standing to bring an action for violation of H.R.S. § 481B-14. In March 2010, the Hawaii Supreme Court held that they did.
One issue raised in the motions for class certification is whether it was appropriate to limit the classes to “non-managerial” employees. The statute simply refers to “employees” without distinction between those that are “managerial” and those that are not. In both Villon and Wadsworth, the court held that a class of non-managerial employees is appropriate. The court concluded in both cases that the legislative history of the statute indicates an intent to protect non-managerial employees.
Earlier this summer, I polled the members of the Academy of Hospitality Industry Attorneys (AHIA) to identify other jurisdictions that regulate “service charges” by restaurants, hotels and other food and beverage services. The jurisdictions in the table below are the ones my colleagues identified. I looked up the statutes and regulations (and one city ordinance) for these jurisdictions and have quoted them below. However, I did not do a 50-state survey (let alone a survey of all municipalities) to confirm that the list below is comprehensive. If you are aware of any other jurisdictions that regulate this subject, please let me know and I will add to the list.
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JURISDICTION AND AUTHORITY |
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Hawaii H.R.S. § 481B-14
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Any hotel or restaurant that applies a service charge for the sale of food or beverage services shall distribute the service charge directly to its employees as tip income or clearly disclose to the purchaser of the services that the service charge is being used to pay for costs or expenses other than wages and tips of employees.
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Massachusetts Mass. Gen. L. c. 149 § 152A |
(a) As used in this section, the following words, unless a different meaning is required by the context or is specifically prescribed, shall have the following meanings:— “Wait staff employee”, a person, including a waiter, waitress, bus person, and counter staff, who: (1) serves beverages or prepared food directly to patrons, or who clears patrons’ tables; (2) works in a restaurant, banquet facility, or other place where prepared food or beverages are served; and (3) who has no managerial responsibility. “Service employee”, a person who works in an occupation in which employees customarily receive tips or gratuities, and who provides service directly to customers or consumers, but who works in an occupation other than in food or beverage service, and who has no managerial responsibility. “Service bartender”, a person who prepares alcoholic or nonalcoholic beverages for patrons to be served by another employee, such as a wait staff employee. “Employer”, any person or entity having employees in its service, including an owner or officer of an establishment employing wait staff employees, service employees, or service bartenders, or any person whose primary responsibility is the management or supervision of wait staff employees, service employees, or service bartenders. “Patron”, any person who is served by a wait staff employee or service employee at any place where such employees perform work, including, but not limited to, any restaurant, banquet facility or other place at which prepared food or beverage is served, or any person who pays a tip or service charge to any wait staff employee, service employee, or service bartender. “Service charge”, a fee charged by an employer to a patron in lieu of a tip to any wait staff employee, service employee, or service bartender, including any fee designated as a service charge, tip, gratuity, or a fee that a patron or other consumer would reasonably expect to be given to a wait staff employee, service employee, or service bartender in lieu of, or in addition to, a tip. “Tip”, a sum of money, including any amount designated by a credit card patron, a gift or a gratuity, given as an acknowledgment of any service performed by a wait staff employee, service employee, or service bartender. (b) No employer or other person shall demand, request or accept from any wait staff employee, service employee, or service bartender any payment or deduction from a tip or service charge given to such wait staff employee, service employee, or service bartender by a patron. No such employer or other person shall retain or distribute in a manner inconsistent with this section any tip or service charge given directly to the employer or person. (c) No employer or person shall cause, require or permit any wait staff employee, service employee, or service bartender to participate in a tip pool through which such employee remits any wage, tip or service charge, or any portion thereof, for distribution to any person who is not a wait staff employee, service employee, or service bartender. An employer may administer a valid tip pool and may keep a record of the amounts received for bookkeeping or tax reporting purposes. (d) If an employer or person submits a bill, invoice or charge to a patron or other person that imposes a service charge or tip, the total proceeds of that service charge or tip shall be remitted only to the wait staff employees, service employees, or service bartenders in proportion to the service provided by those employees. Nothing in this section shall prohibit an employer from imposing on a patron any house or administrative fee in addition to or instead of a service charge or tip, if the employer provides a designation or written description of that house or administrative fee, which informs the patron that the fee does not represent a tip or service charge for wait staff employees, service employees, or service bartenders. (e) Any service charge or tip remitted by a patron or person to an employer shall be paid to the wait staff employee, service employee, or service bartender by the end of the same business day, and in no case later than the time set forth for timely payment of wages under section 148. (f) Whoever violates this section shall be subject to all of the civil and criminal penalties and remedies set forth in section 27C. Any person or employer who violates this section shall make restitution for any tips accepted, distributed or retained in violation of this section, together with interest thereon at the rate of 12 per cent per annum. An employee claiming to be aggrieved by a violation of this section may proceed pursuant to the second paragraph of section 150. The attorney general or, under said section 150, an employee may bring an action under this section within 3 years of any violation of this section. (g) No employer or person shall by a special contract with an employee or by any other means exempt itself from this section.
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Minnesota Minn. Stat. §§ 177.23 Subd. 9 and 177.24 Subd. 3
Minn. Admin. Rules § 5200.0080 Subp. 4b.
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“Gratuities” means monetary contributions received directly or indirectly by an employee from a guest, patron, or customer for services rendered and includes an obligatory charge assessed to customers, guests or patrons which might reasonably be construed by the guest, customer, or patron as being a payment for personal services rendered by an employee and for which no clear and conspicuous notice is given by the employer to the customer, guest, or patron that the charge is not the property of the employee. * * * Sharing of gratuities. For purposes of this chapter, any gratuity received by an employee or deposited in or about a place of business for personal services rendered by an employee is the sole property of the employee. No employer may require an employee to contribute or share a gratuity received by the employee with the employer or other employees or to contribute any or all of the gratuity to a fund or pool operated for the benefit of the employer or employees. This section does not prevent an employee from voluntarily and individually sharing gratuities with other employees. The agreement to share gratuities must be made by the employees free of any employer participation. The commissioner may require the employer to pay restitution in the amount of the gratuities diverted. If the records maintained by the employer do not provide sufficient information to determine the exact amount of gratuities diverted, the commissioner may make a determination of gratuities diverted based on available evidence and mediate a settlement with the employer. Clear and conspicuous notice. For purposes of Minnesota Statutes, section 177.23, subdivision 9, clear and conspicuous notice that the obligatory charge is not a gratuity is notice clearly printed, stamped, or written in bold type on the menu, placard, the front of the statement of charges, or other printed material given to the customer. Type which is at least 18 point (one-fourth inch) on the placard, or 9 point (one-eighth inch) or larger on all other notices is clear and conspicuous. |
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Montana Montana Code § 39-3-201—6(b) (emphasis added).
Montana Rule 24.16.1508
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New York NY Labor Law § 196-d |
Gratuities. No employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee. This provision shall not apply to the checking of hats, coats or other apparel. Nothing in this subdivision shall be construed as affecting the allowances from the minimum wage for gratuities in the amount determined in accordance with the provisions of article nineteen of this chapter nor as affecting practices in connection with banquets and other special functions where a fixed percentage of the patron’s bill is added for gratuities which are distributed to employees, nor to the sharing of tips by a waiter with a busboy or similar employee.
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Washington Wash. Code Rev. § 49.46.160 |
Automatic service charges (1) An employer that imposes an automatic service charge related to food, beverages, entertainment, or porterage provided to a customer must disclose in an itemized receipt and in any menu provided to the customer the percentage of the automatic service charge that is paid or is payable directly to the employee or employees serving the customer. (2) For purposes of this section:(a) “Employee” means nonmanagerial, nonsupervisory workers, including but not limited to servers, busers, banquet attendant, banquet captains, bartenders, barbacks, and porters. (b) “Employer” means employers as defined in RCW 49.46.010 that provide food, beverages, entertainment, or porterage, including but not limited to restaurants, catering houses, convention centers, and overnight accommodations. (c) “Service charge” means a separately designated amount collected by employers from customers that is for services provided by employees, or is described in such a way that customers might reasonably believe that the amounts are for such services. Service charges include but are not limited to charges designated on receipts as a “service charge,” “gratuity,” “delivery charge,” or “porterage charge.” Service charges are in addition to hourly wages paid or payable to the employee or employees serving the customer.
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City of Los Angeles L.A. Municip. Code Chap. XVIII art. 4 |
HOTEL SERVICE CHARGE REFORM ORDINANCE SEC. 184.00. PURPOSE. The Los Angeles International Airport (LAX) is among the world’s busiest airports, hosting millions of travelers every year. The City of Los Angeles (City) operates and maintains LAX, and as a result of this support the businesses in the area adjacent to LAX reap significant economic benefits. In particular, the hotels in the LAX area enjoy the highest occupancy rate of all Los Angeles hotels due to their proximity to LAX. Despite the high occupancy rates of hotels in the LA area, many of these hotels fail to pay their service workers a living wage which in the City is currently $10.64 per hour without health benefits or $9.39 per hour with health benefits. Because of the low hourly wages paid by these hotels, service employees naturally rely on gratuities paid by hotel customers. In recent years, hotels in the LAX area have instituted the practice of adding a “service charge” of 15% to 20% of the bill for banquets and other large group events. The service charge is typically listed as a line item on the bill. Some hotels pass a portion of the service charge to the workers who actually performed the services, while other hotels retain the entire service charge. Currently, there is nothing illegal about this practice. Since hotels have instituted the practice of adding service charges to bills, many hotel workers have reported a significant reduction in the gratuities they receive from hotel guests. Thus, many hotel customers reduce or eliminate gratuities (tips) they would otherwise pay to service workers because they assume that the workers receive the “service charges,” which are added to their bills. By way of this ordinance, the City seeks to improve the welfare of service workers at the LAX-area hotels by ensuring that they receive decent compensation for the work they perform. Accordingly, to the extent that LAX-area hotels institute or continue the practice of charging their customers “service charges,” they will be required by this ordinance to pass the entire service charge on to the workers who actually performed the services for which the service charges are billed. Whereas the LA-area hotels derive a distinct benefit from their location near LA, they have both the ability and responsibility to support the local workforce by engaging in fair employment practices. SEC. 84.01. DEFINITIONS. The following definitions shall apply to this chapter: A. “City” means the City of Los Angeles. B. “Hotel” means a residential building located within the area designated by ordinance as the Gateway to LA (Century Corridor) Property Business Improvement District (Century Corridor PBID) that is designated or used for lodging and other related services for the public, and containing 50 or more guest rooms, or suites of rooms. “Hotel” also includes any contracted, leased, or sublet premises connected to or operated in conjunction with the building’s purpose, or providing services at the building. If the Century Corridor PBID ceases to exist, the boundaries at the time of dissolution shall remain in effect for purposes of this article. C. “Hotel Employer” means a Person who owns, controls, and/or operates a Hotel, or a Person who owns, controls, and/or operates any contracted, leased, or sublet premises connected to or operated in conjunction with the Hotel’s purpose, or a Person who provides services at the Hotel. D. “Hotel Worker” means any individual (1) whose primary place or employment is at a Hotel, (2) who is employed directly by the Hotel Employer or by a Person who has contracted with the Hotel Employer to provide services at the Hotel, and (3) who performs a service for which the Hotel Employer imposes a Service Charge. “Hotel Worker” does not include a managerial, supervisory, or confidential employee. E. “Person” means an individual, corporation, partnership, limited partnership, limited liability partnership, limited liability company, business trust, estate, trust, association, joint venture, agency, instrumentality, or any other legal or commercial entity, whether domestic or foreign. F. “Service Charge” means all separately-designated amounts collected by a Hotel Employer from customers that are for service by Hotel Workers, or are described in such a way that customers might reasonably believe that the amounts are for those services, including but not limited to those charges designated on receipts under the term “service charge,” “delivery charge,” or “porterage charge.” G. “Wilful Violation” means that the Hotel Employer deliberately failed or refused to comply with its provisions of this article. SEC. 184.02. HOTEL EMPLOYERS’ RESPONSIBILITIES. A. Service Charges shall not be retained by the Hotel Employer but shall be paid in the entirety by the Hotel Employer to the Hotel Worker(s) performing services for the customers from whom the Service Charges are collected. No part of these amounts may be paid to supervisory or managerial employees. The amounts shall be paid to Hotel Worker(s) equitably and according to the services that are or appear to be related to the description of the amounts given by the hotel to the customers. The amounts shall be paid to the Hotel Workers in the next payroll following collection of an amount from the customer. Without limitation of the foregoing: 1. Amounts collected for banquets or catered meetings shall be paid equally to the Hotel Workers who actually work the banquet or catered meeting; and 2. Amounts collected for room service shall be paid to the Hotel Workers who actually deliver food and beverage associated with the charge. 3. Amounts collected for porterage service shall be paid to the Hotel Workers who actually carry the baggage associated with the charge. B. This section does not apply to any tip, gratuity, money, or part of any tip, gratuity, or money that has been paid or given to or left for a Hotel Worker by customers over and above the actual amount due for services rendered or for goods, food, drink, or articles sold or served to the customer. Sec. 184.03. RETALIATORY ACTION PROHIBITED. A. No Hotel Employer employing Hotel Workers shall discharge, reduce in compensation, or otherwise discriminate against any Hotel Worker for opposing any practice proscribed by this article, for participating in proceedings related to this article, for seeking to enforce his or her rights under this article by any lawful means, or for otherwise asserting rights under this article. Sec. 184.04. ENFORCEMENT. A. A Hotel Worker claiming violation of this article may bring an action in the Superior Court of the State of California, as appropriate, against a Hotel Employer and may be awarded: 1. For failure to pay Service Charges required by this article – Service Charge reimbursement for each violation. 2. For retaliatory action — reinstatement, back pay, Service Charge reimbursement or other equitable relief the court may deem appropriate. 3. For Willful Violations, the amount of monies to be paid under Paragraphs 1 and 2 shall be trebled. B. If a Hotel Worker is the prevailing party in any legal action taken pursuant to this article, the court shall award reasonable attorney’s fees and costs as part of the costs recoverable. C. Notwithstanding any provision of this Code or any other ordinance to the contrary, no criminal penalties shall attach for violation of this article. SEC. 184.05. EXEMPTION FOR COLLECTIVE BARGAINING AGREEMENT. All of the provisions of this article, or any part of this article, may be waived in a bona fide collective bargaining agreement, but only if the waiver is explicitly set forth in the agreement in clear and unambiguous terms. Unilateral implementation of terms and conditions of employment by either party to a collective bargaining relationship shall not constitute, or be permitted, as a waiver of all or any part of the provisions of this article. SEC. 184.06. NO WAIVER OF RIGHTS. Except for bona fide collective bargaining agreements, any waiver by a Hotel Worker of any or all of the provisions of this article shall be deemed contrary to public policy and shall be void and unenforceable. Any attempt by a Hotel Employer to have a Hotel Worker waive rights given by this article shall constitute a violation of this article. SEC. 184.07. COEXISTENCE WITH OTHER AVAILABLE RELIEF FOR SPECIFIC DEPRIVATIONS OF PROTECTED RIGHTS. This article shall not be construed to limit a Hotel Worker’s right to bring legal action for violation of other minimum compensation laws. SEC. 184.08. SEVERABILITY. If any provision of this article is found invalid by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect.
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