My wife and I went out for a Friday night fish fry. The food was great and the portion size amazing. Not surprisingly, the place was packed.
What was a surprise was the bill. We got the itemized tab, and I gave my credit card to the waitress. When she came back I noticed that the total had changed. A service fee that wasn’t there before had been added. Nothing about a service fee was mentioned anywhere on the menu or signage.
I asked the waitress about it. The owner was adding on a 3% fee for all credit cards. OK. I get it. Credit card fees hurt small businesses. Even so, customers should be notified about this before their credit cards get charged, maybe given an option to pay by debit card or cash.
What she also said surprised me even more. The owner claws back 3% of all tips put on credit cards. That’s the equivalent of a large table every night. And the owner had other plans that would also hurt if he put them into place.
What is legal or not (American law, New York state) in all this? I know that at times adding a charge has been against the contract signed with the credit card company. Don’t know if that’s still in effect.
Taking a percentage of tips feels totally wrong, of course. I think that should be illegal, but laws tend to favor owners rather than employees.
A very pleasant casual meal out got soured by this sleight-of-hand. I can’t decide whether I should avoid this restaurant completely in the future or go back there and ask for our specific waitress to pay her in cash. She gets to keep cash tips.
Employers, Including Managers and Supervisors, May Not “Keep” Tips: Regardless of whether an employer takes a tip credit, the FLSA prohibits employers from keeping any portion of employees’ tips for any purpose, whether directly or through a tip pool. An employer may not require an employee to give their tips to the employer, a supervisor, or a manager, even where a tipped employee receives at least the federal minimum wage (currently $7.25) per hour in wages directly from the employer and the employer takes no tip credit.
New York allows employers to take a tip credit. The amount of the tip credit depends on the employer’s industry and size and the employee’s job duties. For example, the tip credit for wait staff in a restaurant is different from the tip credit for housekeepers. You can find the minimum hourly wage employers can pay employees in the hospitality industry (which includes restaurants, hotels, and resorts) at Summary of Wage Orders and Credits for the Hospitality Industry. Employees must be informed of the tip credit in writing.
I think the fact that it wasn’t disclosed at all made it illegal under previous law, but as of the beginning of this very week, there is a new law in New York that tightens the rules even more. The restaurant was required to either print the credit card price and give a cash discount or print both prices side-by-side.
This is what I find extraordinary. Over here my cards never leave my hand - the waitstaff bring a scanner to the table. They are getting even more sophisticated now. I was at a family dinner before Christmas where the waitress had no problem dividing the bill across three different cards.
I used to tip in cash, but many restaurants now add 10 or 12 percent service charge. If a staff member goes the extra mile, especially with my wife in a wheelchair, they may get a cash tip.
My daughter had a waitressing job 20 years ago. I stopped at the restaurant, had a cup of coffee, and left a twenty dollar bill for my tip.
She told me later that all tips were divided equally by all the servers. I never stopped there again, and my daughter gave notice. The owner claimed tip sharing was necessary because some of the girls were shy.
Well suppose that the proprietor gets only 97¢ on each dollar charged. Is he stealing from the waiter or is the CC company? That’s why I like to leave cash tips. Nowadays, the CC machine asks me to add a tip though.
Yes, I meant that the owner takes the entire service fee - 3% of the pre-tip total - and also takes 3% of the tip amount. Therefore when a credit card is used, the server loses 3% of every tip to the owner.
Thinking more about it, the pre-tip total includes tax. The service fee is therefore levied on the tax. I’m pretty sure that’s totally illegal.
Cash is a solution, but customers can’t know this solution because the problem is not told to them.
I concur that this is clearly wrong, and probably illegal. The owner is in line for some serious legal & financial pain when a server complains to the correct authority.
My wife and I stopped at a restaurant for lunch a few weeks ago. Our $23 bill came with a $5.25 service and health insurance fee. I left $23 on the table, handed the waitress $6 for a tip and we walked out. As we were pulling out of the parking lot, a guy came out of the restaurant and started hollering at us, something about dine and dash. I rolled down my window and asked him if he found the cash for our meal. He said yes. I said that is all I am legally obligated to pay, rolled up my window and left. We saw no signage in the restaurant about this charge, I checked their website when I got home, again nothing. I checked the reviews and found lots of 1 and 2 star reviews because of this service charge. I am now guessing this is why what was a very popular place was only 1/3 full the day we ate there.
If I understand what is going on here, that 3% isn’t going to the owner; it’s going to a company that processes the credit card transaction. The credit card processer is charging the owner 3% of every transaction done through them, and the owner is passing it along to the consumer.
So, if your meal, with tax, comes to $20, and you tip the server $5, bringing the total to $25; and then the credit card processer charges the owner 3% or 75¢, so the owner passes that fee on to you, charging your credit card for $25.75; then the owner is still getting $20, the server is still getting his $5 tip, and the credit card processer gets that 75¢.
The alternative would be for the owner to eat the service fee himself, and you only pay the $25. The owner, then, gets $19.25 instead of $20, because he’s taking the 75¢ out of that.
It doesn’t seem at all illegitimate to me, other than that the owner ought to disclose before the order is placed, that the customer will be charged that 3% if he pays with a credit card.
For the past 60 or so years, credit card companies have charged for the use of their cards. The amounts vary depending on card and usage, but let’s say that 3% is average.
Everybody in America should know this. Certainly everybody who runs a business in America knows this. Complaints about credit cards also run back 60 or so years.
Businesses who hate credit card fees have several options. Most eat the fee as a cost of doing business. Most ordinary businesses who banned credit cards would be out of business in a short time. A few can try to pass the fee onto customers by raising prices. This can also lead to failure. Another alternative is to add on a service fee. This is risky, too, because it seems like a rip-off, and IMO certainly is when you’re not told about it. As everybody here has said, even you, this needs to be disclosed, both morally and in some states legally.
What they can’t do is keep the service fee that is applied to the tip. In the restaurant I went to, the owner also took 3% off the tip. Because of the service fee, using your numbers, I paid $5.15 on my $5 tip, but the server did not get even my $5; she got $4.85. That $0.30 per order is pure grift, and not disclosed anywhere.
That’s what I was steamed about. And so was she. She could do the math as well as the owner. She knew she was getting shafted. Does she quit and chance getting a better job elsewhere? Why should she have to? The owner is at fault. Maybe the system is as well, but the owner can play the game and she can’t.
I disbelieve this “risk”. For decades, we were told “Grocery stores will never take credit cards because their margins are so slim”. Then all of a sudden they all did, and don’t seem to have gone out of business. At this point, folks who don’t use a card are suckers, because they’re overpaying.
CoDB it is. Factor it into prices.
Adding fees after the fact, whether legal or not, is bad business because it pisses people off.
actually, when I lived in Cleveland, top-chef restaurants would deduct CC fee from servers, screwing 5 figure earners while they take home 6 figure money
How is she getting shafted, again? You leave a $5 tip on a credit card, and, just as the owner owes 3% to the credit card company, so does the waitress. Someone has to pay the 3%. If management chooses to pay the 3% as a gesture of goodwill, it might be reported as part her W2 income, then, since the restaurant is effectively paying this to her on top of her wages.