NY Restaurant Policy Raises Hope in Service Charge Discrepancies

Catering companies and restaurants have been the targets of a  number of lawsuits in recent years regarding service charges and hospitality fees. Legal experts say the food service industry will keep experiencing this surge in service charge lawsuits until businesses solidly understand the difference between a tip and service charge.

According to many employment lawyers, as long as the sum of money left behind by customers was not called a “gratuity” or “tip,” it could either be distributed to the service staff or withheld by the management. For many catering companies, these service charges are added to the overall revenue of the business and not distributed to their service workers. That’s because catering servers often make more than minimum wage, they would argue.  Additionally, statistics indicate that catering service workers make more than restaurant service workers because the events are often more expensive than a simple meal.

Whether the service charge needs to make up for any lost wages, or if it is needed to ensure that the business is achieving minimum wage pay standards, can be a factor.  According to the Fair Labor Standards Act, while service charges can be withheld at the management’s discretion, it is illegal in some states to fail to disclose that the service charges do not go to the servers.  However, gratuity charges and service charges can be used as tip-credit to make up for any lost wages, and if the minimum wage salaries do not reach the $7.25 per hour, according to the U.S. Department of Labor.

These lawsuits also helped establish the New York Hospitality Wage Order from the New York State Department of Labor, which went to effect at the beginning of this year.

 Overview of New York Hospitality Wage Order

The New York Hospitality Wage order states that any charge made in addition to the charges for food, beverage, lodging, or any other specified material or services — that are not considered a part of a service charge — shall be added to a gratuity. Essentially, when a charge is meant to be a gratuity, it must be distributed in full to the service employees or food service workers. Additionally, employers must explain the difference between service charges and gratuities, as well as explain whether what’s collected will go to the service workers.

Under the New York Hospitality Wage Order, adequate notification would include a statement in the contract or agreement with the customer, and on any menu and bill listing prices, specifying that these charges are for the establishment rather than the workers.  Under the New York Hospitality Wage Order, New York restaurants must follow the regulations listed below:

• Tips: Due to the new policy, minimum wage rate increase for tipped employees.  The handling of tips is subject to regulation for the first time in New York state.
• Extra Pay: The new order requires that the establishment must pay extra under specific circumstances, such as call-in pay, spread-of-hours pay, and uniform-maintenance pay.  Employers must add this extra pay to wages at any pay level, rather than only add to the pay of minimum wage employees.
• Non-Hourly Rates of Pay: All non-exempt employees, except commissioned salespersons, are eligible to be under the new policy.
• Meals: Whenever the Labor Law requires meal periods, employers have to either allow employees to bring their own food or give them a meal at a cost no greater than the meal credit amount in the wage order.

File a Restaurant Wage Lawsuit Today

If you believe that you or a loved one have been the victim of a Restaurant Wage mishap, you have legal options.  Please visit the Unpaid Overtime Lawsuit: Wage & Hour, Overtime Pay Class Action Lawsuit Investigation.  There, you can submit your claim for a free legal review and if it qualifies for legal action, a seasoned employment lawyer will contact you for a free, no-obligation consultation.  You will be guided through the litigation process with no out-of-pocket expenses or hidden fees.  The Wage and Hour attorneys working this investigation do not get paid until you do.