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Harvard Club to Pay Its Wait Staff $4 Million

posted Sep 24, 2012, 3:11 PM by Adam Chandler   [ updated Jan 14, 2013, 12:21 PM ]
A dispute over how guest charges were characterized by the Harvard Club of Boston has cost it $4 million, the result of settling a class-action lawsuit filed by its servers.

The Harvard Club pays its servers well over minimum wage and many times more than the lower tip-credit minimum wage that most restaurants pay their servers.  In exchange, the Harvard Club maintains a strict no-tipping policy.  Customers pay what is on their check and nothing more.  The problem for the Harvard Club, in this case, was what exactly appeared on the guest check.

In addition to the normal cost of food and drinks, the Harvard Club added to each guest check a 17 percent "Club Charge."  The servers argued that this charge was confusing to patrons and would lead them to believe that they were in fact leaving a gratuity and the money would be turned over to the employees.  The payment for the Club Charge, however, was retained by the employer.  The servers argued that this practice violated Massachusetts wage and hour laws.

Tips and service charges are treated as wages, and employers cannot withhold or deduct from them without running the risk of paying multiple damages and attorneys fees.  Massachusetts law distinguishes between tips and services charges, which must be paid to the employee, and house or administrative fees, which the employer may collect and retain.  The devil is in the details, however, and Massachusetts employers  who wish to charge a house or administrative fee must provide a designation or written description of the fee that informs the patron that the fee does not represent a tip or service charge for wait staff or service employees.  G.L. c. 149 s. 152A.  In cases like this, where the facts may be close, the threat of multiple damages looms is imposing, and an employer may be forced to pay a large settlement to avoid the even larger potential legal fees and judgment.
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