Are Mandatory Tips at Restaurants Legal?

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Last week, news outlets went crazy after a small Bay Area paper reported that servers in San Francisco were demanding a mandatory 25% gratuity on every check. Far from being an organized movement, the sources turned out to be a few servers talking about how that kind of guaranteed tip would sure be nice. (Perhaps the author will do a follow-up on an area man who plans to win the lottery.) But if a bevy of waiters really did start making demands, would that kind of mandatory tip be legal? 

The short answer is: It depends where you are, because laws (and case law) vary from state to state. If you haven’t explicitly agreed to a certain percentage fee, there are precedents for refusing a “mandatory,” tacked-on tip, regardless of any restaurant policy written on the menu. But refusing to pay the gratuity, even if you win the battle, could end up costing you a whole lot more in legal fees.

State guidelines on tips are often laid out in tax laws about what is subject to sales tax and what isn’t; mandatory charges often are subject to taxes while voluntary gratuity typically is not—which means making it mandatory is usually more trouble for the establishment. If it’s called a “service charge” rather than a “tip,” the money could go to the establishment, or it could go to the server and be taxed as normal wages. In any case, a “service charge” is typically less negotiable and is particularly sticky when negotiated beforehand.

The key word here is negotiated. If you’re planning a banquet and you agree to a total cost that includes an automatic “service charge of 15%,” that’s much stronger contractually than simply reading a menu edict that “an 18% gratuity will be added to parties of 8 or more.”

In some states, such caveats have proved to mean nothing at all. Take New York, where Humberto A. Taveras ate at Soprano’s Italian and American Grill in 2004. After being less than impressed by a $77.43 meal for nine, he refused to pay the required $13 (18%) tip. The restaurant owners called the police, who then arrested Taveras and charged him with theft. But the district attorney had those charged dropped the following week, saying that any gratuity is by its nature discretionary.

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A similar case occurred in Pennsylvania in 2009. A group of six college students went to eat at a pub in Bethlehem and had allegedly lousy service (like having-to-get-their-own-cutlery-because-their-waitress-is-having-a-smoke-lousy). So two of them refused to pay the demanded 18% tip for parties of six or more and were arrested. Again, the district attorney reversed course, saying it wasn’t worth prosecuting because tips are generally voluntary.

And the same sort of legal drama could play out in California or other states, but without such cases, lines often remain murky as to where “mandatory” truly begins.

Of course, the tension produced by the idea of a mandatory tip isn’t just about whether it’s legal. It’s rooted in the patron-provider relationship; servers want more money and customers want more value for every penny. In other words, do servers deserve a 25% tip?

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Depending on which state you’re in, your waiter or waitress will rely more or less on their gratuities. Federal law, guided by the Fair Labor Standards Act, states that tipped employees have to be paid at least $2.13 an hour, and the tips have to bring their hourly rate up to the minimum wage of $7.25, or the employer has to make up the difference. Fourteen states don’t go a penny over the $2.13 requirement for their minimum wages. Others demand the same for tipped and non-tipped employees. In Washington, for example, everyone gets at least $8.67 per hour (which means you probably want to set your course for Seattle if you plan on getting into the service industry).

The other inevitable question is whether service suffers when tips are mandatory. If they’re treated like a tax rather than a system to reward good work, will servers get complacent? Many other factors, from geography to customer volume, come into play here. But you can always start the meal with a threat of litigation (and a rousing speech on the legality of gratuities) if you want to try to tip the scales in your favor.

Katy Steinmetz is a reporter at TIME. Find her on Twitter at @KatySteinmetz. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

4 comments
KevinV.Russell
KevinV.Russell

You know in Australia hospitality workers aren't particularly well paid since it is seen as unskilled. But they are still paid much better than this. I don't know how you get anyone to work in the food service "industry" in the U.S. How could people get so desperate? And why does your so called "society" tolerate such wage exploitation? It's offensive to me as a sentient human being.

AndreaBernal
AndreaBernal

This is a simple thing I think of Should be on by the amount of service given... Poor service means less of a tip. It is not up to the consumer to pay these peoples wages. That's what bosses are for. That's no fair to the patron who's paying for the service, what if the service was poor... I should give a tip ! I don't think so.. It's bs like this that has this country all in shambles. Laws like this which have no say which is so unamerican. Makes it alittle harder to be a proud law abiding citizen. It's up to the owners of the establishment to protect their employees by having good servers working for them, so they don't worry about not being tipped.

johndorchester
johndorchester

The whole tipping practice needs to be ended. Its time to go the European route and include expenses for services in the price. It is transparent and no need to worry about being a little math challenged at the end, or to figure out whats on the bill after a few drinks.

I bet, including the service in the price of the food in the menu will reduce the total expense, because the restaurants can pay $15/hour for the waiter and have them cover three tables. Thus, the cost to each customer for a meal will about $5 for service. With the current practice, for a meal of $100 the customer will end up paying $20. Thus, changing the tipping practice to an increase in price will save the customer $15. Of course, the wait staff will object to this, but the reason d'etre for restaurants is to worry about the customer experience, not the wait staff.

MichaelBelk
MichaelBelk

I have no problem with them suggesting a law for increased tips as long as it made known to the customers beforehand.  A lot of restaurants already impose this charge, however I would rather the money go to the servers.