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Restaurant owner retaining tip percentage California

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  • Restaurant owner retaining tip percentage California

    In the restaurant where I work we occasionally have in house functions, such as small weddings. As with any party over six persons the 18% gratuity is added to the check but in these cases the owner takes 25% from the waiters gratuity for "in-house fees", plus if it was paid by credit card and additional 3%, for processing fees. None of this goes to the kitchen staff and we are still expected to tip out the chefs and dishwashers. Is this legal?

  • #2
    When such a fixed "gratuity" is added to a check, as is common for large parties, that is not a "tip"; it is rather a service charge. Tips are voluntarily given by customers (or not) and the amount is completely left up to the customer. Therefore, such "gratuities" need not be distributed to employees.

    Now, this "in-house fee". Could this also be defined as a tip pool? Is it related at all to the above scenario?

    Regarding credit card processing fees. Under federal law, the employer IS allowed to withhold up to the percentage the card issuer charges from tips charged to the card (but not from the food and beverage amount). However, California law prohibits this "pass-through".

    http://www.dol.gov/esa/regs/compliance/whd/whdfs15.pdf
    http://www.dir.ca.gov/dlse/FAQ_TipsAndGratutities.htm
    Last edited by Pattymd; 06-01-2008, 08:30 AM.
    I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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    • #3
      It is actually NOT a service charge. It is the same gratuity that is added to each and every party over 6 people. He charges the guest a Room hire fee over and beyond the gratuity that includes set up and break down and linens etc. The added gratuity is strictly tip.... If he is taking 25% of this gratuity then why not of every other included gratuity of parties over 6?

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      • #4
        Did you read the links I provided? It specifically states that such a fixed amount added to the bill IS a service charge.
        I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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        • #5
          Yes, I read them, thank you. So in effect, the moment I push that "Auto Grat" button I am signing my tip over to the owner, right? If I leave it to the customer to decide he cannot lawfully take a percentage. There was an identical case in NY on a cruise/restaurant where the court ruled that the owner was in the wrong. I dont have access to the link right now unfortunately.

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          • #6
            I would be interested in seeing that link to the court case when it becomes available. Thank you.
            "Reality is that which, when you stop believing in it, doesn't go away".
            Philip K. **** (1928-1982)

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            • #7
              Originally posted by DAW View Post
              I would be interested in seeing that link to the court case when it becomes available. Thank you.
              And, since it would only apply in the states that the NY district court serves (which is NOT California)............................
              I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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              • #8
                Agreed, but it would be interesting to read the decision even so and see how universal the logic used is. I have read CA-DLSE decisions that cite out of jurisdiction court decisions. Out of jurisdictions sometimes (but not always) have influence if not legal precedent.

                Also, as stated the court decision seems to be directly opposing something pretty cut-and-dry in the federal rules, and those are always fun decisions to read even when they have no legs.
                "Reality is that which, when you stop believing in it, doesn't go away".
                Philip K. **** (1928-1982)

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                • #9
                  Here it is:
                  http://www.nytimes.com/2008/02/15/ny...ion&oref=login

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                  • #10
                    DAW and Patty: The requirement is not as simple as whether or not the customer "must" pay the charge. You really should read DLSE Opinion Letter 2000-11-02. The thinking in the NY case reflects the same logic used in CA Labor Code §356.


                    For functions where everything is booked in advance with a contract etc., a service charge would be the employer's.

                    However, when there is a policy to autograt for parties of 6 or more, where the servers are directly tipped in the normal course of work for parties under 6, then the service charge belongs to the employee. This is mostly because a reasonable customer would believe that the service charge gets paid to the employee.

                    FYI, the service charge for parties of 6 or more was started to keep servers from getting stiffed when they do work for large parties.
                    Last edited by TheRed; 06-01-2008, 03:09 PM.

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                    • #11
                      Two things jumped out at me.

                      First, this was decided by the state Court of Appeals. Accordingly, it would not apply in California (it wouldn't even apply in, for example, New Jersey since it wasn't a federal district court decision).

                      Second, the last statement regarding the customers being notified that the service charge/fixed gratuity would not be passed through to the wait staff would release the employer from this requirement.

                      It would still be interesting to read the actual court decision, not just a newspaper's summary of it, but not interesting enough for me to go searching for it.

                      You're certainly welcome to try to find a California attorney who will litigate it for you.
                      Last edited by Pattymd; 06-01-2008, 03:40 PM.
                      I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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                      • #12
                        Originally posted by Kalifornia View Post

                        Thank you. If the article is correct, the court decision relies on a NY state law (Labor Law § 196-d) and would not be applicable to other states. The decision does not seem to challenge the federal rule at all, but rather just cites a NYS specific law.

                        "The court’s decision relied on a state law that says no employer shall demand or accept, directly or indirectly, any part of the gratuities received by an employee or any charge purported to be a gratuity for an employee."

                        -----

                        The OP is in CA, and the CA-DLSE cited by TheRed however does seem applicable.
                        Last edited by DAW; 06-01-2008, 04:10 PM.
                        "Reality is that which, when you stop believing in it, doesn't go away".
                        Philip K. **** (1928-1982)

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                        • #13
                          Originally posted by Pattymd View Post
                          It would still be interesting to read the actual court decision, not just a newspaper's summary of it, but not interesting enough for me to go searching for it.
                          http://www.nycourts.gov/ctapps/decis...08/17opn08.pdf
                          "Reality is that which, when you stop believing in it, doesn't go away".
                          Philip K. **** (1928-1982)

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                          • #14
                            The CA and NY tip laws are almost identical.

                            In CA there is a dearth of published case law on the service charge issue. The only published authority, aside from the code, are the DLSE Opinion Letters and Enforcment Manual. The DLSE has already flipflopped once on this issue.

                            Another reason not to mess with it is that if you pay servers out of a non-gratuity service charge it become part of the regular rate of pay for OT. It also doesn't count as a tip for purposes of the tip credit.

                            The service charges for normal service, in the restaurants I've worked for, would be considered gratuities due to deficiencies in policy and practice.

                            It's entirely different from the catering/banquet service charge.

                            Comment

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