News & Articles

Employer Alert: Include disclaimers for service charges or risk costly lawsuits and penalties

Published on May 1, 2019

Restaurants and other hospitality industry employers should be cautious—government entities and private plaintiffs are looking for claims that these employers improperly retained service charges without including the proper disclaimers on their receipts and menus.

The law currently states that an employer is required to pay all service charges, automatic gratuities, delivery charges or porterage charges to its employees unless the employer discloses the percentage of the charge that is payable to employees on an itemized receipt and in any menu. RCW 49.46.020(3); RCW 49.46.160.

Recently, government entities and plaintiffs’ firms seem particularly interested in enforcing this provision. The Washington Department of Labor & Industries issued new guidance on how employers should deal with tips and service charges. The Seattle Office of Labor Standards has also recently brought enforcement actions against restaurants that retain service charges without disclaimers on their receipts, taking the position that this practice violates Seattle’s Wage Theft Ordinance.

Enforcement actions and lawsuits can come with high costs, including civil penalties, back pay, double damages, 12% interest, and attorney fees.

If your business retains any portion of a service charge, automatic gratuity, porterage charge, or delivery fee, you should ensure that your receipts and menus clearly disclose the percentage paid to the employee and kept by the business.

If you have questions or are facing an enforcement action or lawsuit, please feel free to contact any member of the Employment Rights, Benefits & Labor Group at Ryan, Swanson & Cleveland, PLLC.

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