Mass-Peculiarities: An Employers Guide to Wage & Hour Law in the Bay State 2022 Edition

© 2022 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2022 ed. | 129 By explicitly tying the definitions of tips and service charges to the individuals for whom they are intended, the Tip Statute exempts from its scope any money that patrons explicitly leave for or give directly to employees who are not wait staff employees, service employees, or service bartenders. 734 As a result of the statute’s amended language, courts judging whether a mandatory charge is a service charge not only consider what a fee is called, but also whether a customer would reasonably expect that the fee is charged in lieu of or in addition to a tip or gratuity for employees covered by the statute. 735 In Hovagimian v. Concert Blue Hill, LLC , 736 the SJC addressed both issues. In that case, the employer’s event contracts stated that patrons would be charged a 10% administrative fee for banquet services. However, the event invoices provided to patrons referred to the fee as a service charge. The trial court dismissed plaintiffs’ claims that the failure to remit the 10% fee violated the Tip Statute, and the Appeals Court affirmed. The SJC reversed, holding that the disputed charges were service charges under the Tip Statute. Although the event contracts informed patrons that the charge was an administrative fee, the SJC explained that the invoices referred to the fee as a “service charge” and that language settled patrons’ expectations as to whether any portion of the fee would be going to the employees or whether they should be tipped separately. 737 While many employers add disclaimers to their invoices explaining which, if any, fees are remitted to wait staff, this is not the only factor that courts consider in assessing a customer’s the service employees in quest ion. DiFiore v. Am. Airlines, Inc. , 454 Mass. 486, 497 (2009) (“[A] ‘service charge’ need not be charged by an employer, but may be imposed by any person or ent ity.”). See Sect ion VIII.F. 734 While the T ip Statute t reat s service charges like t ips in requiring their dist ribut ion to certain types of employees, service charges are not t ips under the FLSA. See 29 U.S.C. § 203 et seq .; 29 C.F.R. § 531.50 et seq. In the past , unlike the Massachuset t s T ip Statute, there had been ambiguity as to whether the FLSA applied to t ips if an employer had not taken the t ip credit , as described in sect ion VIII.E. See , e.g. , Cumbie v. Wendy Woo, Inc. , 596 F.3d 577 (9th Cir. 2010) (holding FLSA did not apply to t ips where employer had not elected to take the t ip credit ). However, in March 2018, Congress amended the FLSA to make clear that employers may not retain t ips received by it s employees for any purpose, regardless of whether the employer takes a t ip credit. 29 U.S.C. § 203(m)(2)(B) (“An employermay not keep t ips received by it s employees for any purposes, including allowing managers or supervisors to keep any port ion of employees’ t ips, regardless of whether or not the employer takes a t ip credit .”). Moreover, Congress further amended 29 U.S.C. § 216(b) to create a separate cause of act ion for the recovery of unpaid or improperly withheld t ips. See 29 U.S.C. § 216(b) (“Any employer who violates sect ion 203(m)(2)(B) of this t it le shall be liable to the employee or employees affected in the amount of the sum of any t ip credit taken by the employer and all such t ips unlawfully kept by the employer, and in an addit ional equal amount as liquidated damages.”). 735 M.G.L. ch. 149, § 152A(a). In Mouiny v. Commonwealth Flats Development Corporation , the court held that stat ion fees were not service charges because customers could not reasonably expect these fees to be given to wait staff. Mouiny , No. SUCV2006- 1115-BLS1, at 14 (Mass. Super. Ct . Aug. 18, 2008) (Gant s, J.) (“ It is doubt ful that any reasonable pat ron would expect that a ‘stat ion fee’ would be paid direct ly to the wait staff . . . .”). The court concluded that the pre-2004 version of the statute simply did not apply to a fee that was not called a service charge, but also held that “as a mat ter of law, under both versions of the [T ip Statute], these stat ion fees were not gratuit ies and were not required to be dist ributed among the servers.” Id . at 13. In Hernandez v. Hyatt Corporation , the court found that “no reasonable pat ronwould expect that the [station fee] . . . would be remit ted to the wait staff in lieu of or in addit ion to a t ip.” Hernandez , No. SUCV2005-0569-BLS1, at 7 (Mass. Super. Ct . May 4, 2009) (Hinkle, J.). 736 488 Mass. 237 (2021). 737 Id . at 244-45. In Norrell v. Spring Valley Country Club, Inc. , 98 Mass. App. Ct . 57, 67 (2020), the Appeals Court held that where an invoice labeled a fee as a “house charge,” the use of the term “service charge” in promot ional materials did not impose per se liability under the T ip Statue. The SJC in Hovagimian cited to Norrell and suggested that the use of the phrase “service charge” on the pat ron invoices was the disposit ive fact in that case.