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Massachusetts Supreme Judicial Court Interprets the “Tips Act”

By on April 16, 2015

Massachusetts law protects the “tips” or gratuities that waiters and similarly employed individuals typically receive from customers.  That law is commonly known as the Tips Act  (M.G.L. ch. 149, sec. 152A). The Tips Act provides that all tips must be given to the employees that earned the tips, and that tips cannot be shared with managers or the employer itself.  The Tips Act applies to three categories of employees:   “wait staff employees,” “service employees,” and “service bartenders.”  “Wait staff” includes waiters, waitresses, bussers, and counter staff who serve food or beverages (or bus tables) in a restaurant or banquet facility and who have no managerial responsibility.  “Service employees” is a catch-all definition that includes any employees who provide services directly to customers and who customarily receive tips, but also have no managerial responsibility.  “Service bartenders” are employees who prepare beverages to be served to customers by other employees.

A recent Supreme Judicial Court case, Meshna & others vs. Scrivanos & another, interpreted some key provisions of the Tips Act.  In Meshna, current and former Dunkin’ Donuts employees filed suit over a “no-tipping” policy found at some individual stores that prohibited employees from receiving tips from customers.  The plaintiffs argued that the Tips Act prevented employers from instituting a “no-tipping” policy.  The defendants prevailed, with the Court finding that the Tips Act allows employers to have a “no-tipping” policy so long as the policy was clear to customers.

The Court went on to consider the scenario where an employer has a no-tipping policy, but does not communicate that policy to customers.  The Court held that if the policy is not communicated, then any tips left at the store belong to the employees, as customers have a reasonable expectation that the money left as tips will be given to the wait staff.  As long as the policy is explicitly stated by the employer, however, even money left by customers may be retained by the employer without violating the Tips Act, regardless of the customer’s intent.  The Meshna holdings are consistent with existing interpretations of the Tips Act.

Some restaurants and banquet halls impose an additional “administrative” fee on their invoices and contracts. Under the Tips Act, employers are permitted to impose an “administrative fee,” or something similar, but such fees must be clearly stated to all customers (in a contract or on the bill itself) that the administrative fee is paid to the employer or management.  Because the Tips Act defines “service charge,” “tip,” and “gratuity” as synonyms, employers that desire to include an additional charge beyond the cost of the food, should avoid the term “service charge” and use “administrative fee” or “management fee” as a best practice.  Massachusetts Courts want to see evidence that the employer informed customers that any extra fees do not represent a gratuity for employees.  Should you have questions regarding whether your invoices or current practices comply with the Tips Act, consult your employment law attorney for a definitive answer.