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In an Au&shy;gust de&shy;ci&shy;sion from a fed&shy;eral court in Hawaii, a hote&shy;lier was found li&shy;able for un&shy;paid wages to a group of over 100 wait staff employees who claimed the company cheated them out of tips by retaining a portion of gratituty fees added to guest checks. The Planitiffs' fac&shy;tual al&shy;le&shy;ga&shy;tions fo&shy;cused on the fail&shy;ure of man&shy;age&shy;ment to dis&shy;close that 100% of the &ldquo;ser&shy;vice charge&rdquo; added to re&shy;sort cus&shy;tomers&rsquo; food and bev&shy;er&shy;age bills would not be dis&shy;trib&shy;uted to wait staff. In con&shy;nec&shy;tion with this fac&shy;tual claim, Plain&shy;tiffs pointed to two Hawaii state wage laws:
Hawai&shy;ian statute, sec&shy;tion 481B-14, which re&shy;quires ser&shy;vice charges ap&shy;plied by ho&shy;tels or restau&shy;rants to be dis&shy;trib&shy;uted as &ldquo;tip in&shy;come&rdquo; un&shy;less it is clearly dis&shy;closed that the ser&shy;vice charge will be used to pay some&shy;thing other than wages or tips of em&shy;ploy&shy;ees.
Hawaii Re&shy;vised Statutes, sec&shy;tion 388-6 con&shy;cern&shy;ing &ldquo;With&shy;hold&shy;ing of Wages.&rdquo; This statute pro&shy;hibits em&shy;ploy&shy;ers from de&shy;duct&shy;ing, re&shy;tain&shy;ing or oth&shy;er&shy;wise caus&shy;ing not to be paid &ldquo;wages&rdquo; to an em&shy;ployee. &ldquo;Wages&rdquo; un&shy;der Hawai&shy;ian law are broadly de&shy;fined to in&shy;clude &ldquo;tips or gra&shy;tu&shy;ities of any kind.&rdquo;
The hote&shy;lier's ar&shy;gu&shy;ments that the Hawaii statutes at is&shy;sue were am&shy;bigu&shy;ous and in&shy;con&shy;sis&shy;tent with the Fair La&shy;bor Stan&shy;dards Act were re&shy;jected by the Court, which noted that states are free to pro&shy;vide greater pro&shy;tec&shy;tions to em&shy;ploy&shy;ees than that set forth un&shy;der the FLSA. A trial will be held at a fu&shy;ture date to de&shy;ter&shy;mine the amount of dam&shy;ages the em&shy;ploy&shy;ees are en&shy;ti&shy;tled to re&shy;ceive.
The Bottom Line: Em&shy;ploy&shy;ers must be cog&shy;nizant of the wage laws of the states in which they op&shy;er&shy;ate and rec&shy;og&shy;nize that such laws may pro&shy;vide greater pro&shy;tec&shy;tions than the FLSA. While the FLSA clearly ex&shy;cludes nondis&shy;cre&shy;tionary ser&shy;vice charges from the de&shy;f&shy;i&shy;n&shy;i&shy;tion of &ldquo;tips,&rdquo; some state laws may not, or may re&shy;quire the em&shy;ployer to take ad&shy;di&shy;tional steps to en&shy;sure such fees are not owed to em&shy;ploy&shy;ees.
Read additional details about this case on our sister blog, <a href="http://www.hospitalitylawg.com/">HospitalityBlawg</a>.

Court Finds That Employer’s Failure to Pay “Service Charges” to Tipped Employees Violated Hawaiian Law