Restaurant Law Blog

Thursday, July 30, 2015

Luxury NYC Eatery Facing Labor Law Violations Over Gratuity Faux Pas

I was charged a 20% ‘service fee’ for a private dining event in New York City. Is this type of fee permissible under New York law? 

Beginning in July, 2013, the New York Attorney General’s Office began to examine the operating structure of the luxury restaurant Per Se, located on Columbus Avenue, New York, New York. According to the factual allegations, the restaurant was attaching a significant “service fee” to the final bill for private dining services amounting to 20% of the entire check. On the service agreement, the service fee was not explicitly described, and most patrons believed it to be a fee included to ensure proper gratuity was paid to the wait staff scheduled to work the event. In reality, however, the 20% fee – which was presumably sizable considering the $310.00-per-plate prix fixe menu – was used for daily operational costs of the restaurant, and was in no way paid to the wait staff for any private event scheduled by the restaurant.

New York Attorney General’s Office gets involved 

As a bit of background, New York lawmakers have historically grappled with similar hospitality industry wage issues, resulting in the 2011 enactment of the Hospitality Wage Order (HWO). In the HWO, restaurants are required to follow specific protocols when implementing surcharges and mandatory fees. Further, the HWO created a presumption that a percentage-based surcharge not specifically itemized to address the costs of food, drinks, lodging, or the like will be considered a gratuity, and must thereafter be passed on to the wait staff accordingly. If, in fact, a non-itemized surcharge is not a gratuity, the final bill must state as such.

Here, the OAG alleges that Per Se did not make the required changes to its private dining and banquet contracts, and even stated in emails to prospective clientele that the charges were “service” or “gratuity” charges. Accordingly, the restaurant agreed to pay $500,000.00 in settlement to resolve the matter, as well as engage in training measure to ensure further compliance with New York laws.

If you are a restaurant owner and are trying to avoid similar fines and penalties, please contact the New York City restaurant attorneys at the DiPasquale Law Group today: 646-383-4607.

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