Tip Pool Violations – Service & Banquet Fees

Service Charges and Banquet Fees

Federal wage laws treat tips and “service charges” differently. A “tip” is generally a gift given by a customer in recognition of good service. A “service charge,” on the other hand, is a nondiscretionary fee charged by the employer for a specific service. For instance, a 20% service charge is often added to a customer’s bill when they rent out a private dining room at a restaurant. Your employer cannot make you share tips with kitchen workers, members of management, etc. However, there is no such prohibition on “service charges” or “banquet fees.”

In fact, many restaurants distribute the “service charge” or “banquet fee” to banquet planners, managers, caterers, etc. So long as the charge/fee is truly not a tip, federal law does not prohibit the employer’s distribution of these fees to non-service personnel.

This is extremely common in restaurants, hotels, strip clubs, and country clubs.

But just because your employer calls the charge a “service” or “banquet” fee does not mean that the law will treat the fee as such. In fact, I have had considerable success in proving that these types of fees are truly “gratuities” such that the employer must comply with the tip pool laws. Read more here.

The law in this area is complicated and very fact-specific.

Check out my videos for more information. Or submit a confidential claim form.

What if my employer charges automatic gratuity or automatic service charges to my customers and I do not receive this money as a tip?