Do you work as a server in a restaurant or banquet hall where your customers are charged a “service fee” on their bills? In California, if customers reasonably understand the service fee to be a gratuity, and haven’t been informed to the contrary, servers are entitled to the full amount of the fee paid by patrons as a tip.
A recent case, Ordono et al v. Marriott International Inc., shows how employers can violate this law. A California Superior Court judge ruled this month that the San Francisco Marriott Marquis hotel illegally kept about $9 million in service charges from 2012-17 that should have gone to banquet staff as earned tips. The judge ordered the hotel to pay that money to employees who worked as banquet servers during that time.
California Labor Code Section 351 prohibits employers from taking any part of a gratuity left for an employee by a customer. But what if gratuity isn’t explicitly defined on a bill? In the hotel case, according to the San Francisco Chronicle, the plaintiffs argued that banquet customers would have reasonably believed that the 23%-24% charge added to their bills for what was described in their contracts as a service fee was given to service staff as gratuity.
The case also included testimony that the vast majority of hotel banquet customers didn’t leave tips on the table because, according to the judge, they believed gratuity was included in the service charge.
The judge wrote in his ruling that “a reasonable customer would understand and intend the service charges to be a gratuity for service staff.” He said some of the contracts drawn by hotel managers for banquet customers described the entire charge as a gratuity.
“It was common practice for employees, including banquet servers and their managers, to refer to service charges as gratuities or tip pay.” the judge said.
According to the judge, the affected banquet servers made between $11 and $13.50 per hour and were paid $70 million in service fees during 2012-17 but the hotel kept the remaining $9 million.
Starting in April 2017, according to the Chronicle, the hotel amended its contracts to say part of the service fee was a house charge that covered expenses and should not be considered a gratuity or tip. That meant the hotel could legally keep some of the service fees collected from customers as long as the rest was distributed to workers eligible to receive tips.
The ruling against Marriott follows a 2019 California Court of Appeals ruling in O’Grady v. Merchant Exchange Productions, which established that mandatory service charges could be found to be a gratuity.
Part of the opinion in that case read: “The fair inference from the allegations is that the service charge is plainly perceived by the customer to be a gratuity, and is intended by the customer to be a gratuity. … An equally fair inference is that the customer would not intend a gratuity to be pocketed by defendant.”
If you are a service worker who is eligible to receive tips and your employer charges patrons a service fee as part of their bill, whether as part of a banquet contract, or for service at a large table, you may be entitled to all or some of this fee as gratuity. If you feel like your employer isn’t sharing all of the tips you’ve earned, contact us today for a free consultation.
Keller Grover’s attorneys have decades of experience in employment law and have successfully represented workers who’ve had gratuity withheld by their employers, as well as other wage and hour violations.