do restaurant employers have the right to pay for credit card service fees out of waiter's salary?

[Dear Summer]

When a customer pays with a credit card, visa/mastercard/etc charge a service fee.
The restaurant owner takes 5% off the employee's total tip money that was earned through cards. Does that make sense?

Is this legal? Shouldn't the restaurant owner bear this cost as operating expense instead of taking it from already low paid waiters and waitresses?

 

[miketheidiot]

makes sense i suppose, although i think the service charge is usually 1-3%

 

[3chordcharlie]

If they are taking 5% of the tip, and 5% is the rate they pay, I don't see the problem. If they're covering more than the actual cost of processing the tip, then it's certainly not fair, and possibly illegal.

 

[guyver01]

Originally posted by: Dear Summer
Is this legal? Shouldn't the restaurant owner bear this cost as operating expense instead of taking it from already low paid waiters and waitresses?

legal? probably
moral? probably not


owner can do whatever he wants, and if it's in the hiring paperwork as a condition of employment...

if you dont like it. quit.

 

[MotionMan]

Originally posted by: Dear Summer
When a customer pays with a credit card, visa/mastercard/etc charge a service fee.
The restaurant owner takes 5% off the employee's total tip money that was earned through cards. Does that make sense?

Is this legal? Shouldn't the restaurant owner bear this cost as operating expense instead of taking it from already low paid waiters and waitresses?

I do not know about every jurisdiction, but this sounds completely illegal and the restaurant owner could be setting himself up for a huge lawsuit.

If this was happening to me, I would call an employment lawyer (which actually means I would call me ).

MotionMan

 

[lupi]

lol, they actually do that?


another reason you'd have to be an idiot working one of those jobs.

 

[guyver01]

found this article... can't read it from work, but it might give some insight.


http://www.tip20.com/garnishin...sparks-controversy/766

 

[MagnusTheBrewer]

The processing fee is normal overhead of a company accepting credit cards and is in no way the responsibility of the waiters. Further, not all tips are charged, So, are they keeping a percentage of all declared tips? This is a sleazy business practice and if they are keeping a percentage of all declared tips whether charged or not then, yes it is against the law. Good waiters have a marketable skill and can easily move to greener pastures. I recommend he/she does so.

 

[guyver01]

For those saying "This is definitey illegal" ... what law exactly is being broken?

The employer is not required to pay the credit card processing fees. So if someone leaves the tip on a credit card, the fee can be deducted.

 

[lupi]

Originally posted by: guyver01
For those saying "This is definitey illegal" ... what law exactly is being broken?

The employer is not required to pay the credit card processing fees. So if someone leaves the tip on a credit card, the fee can be deducted.

employer not employee makes the agreement with the CC company.

 

[newnameman]

Originally posted by: guyver01
For those saying "This is definitey illegal" ... what law exactly is being broken?

The employer is not required to pay the credit card processing fees. So if someone leaves the tip on a credit card, the fee can be deducted.

Well according to the article, the practice is allowed under federal law, but prohibted by some states.

The practice is prohibited in some states, such as California and Colorado, but it is legal under federal labor laws. Where permissible, some operators continue to make servers pay the proportion of the fees related to tip amounts, despite controversies and the risk of losing disgruntled employees.

...

?Federal law expressly allows for the practice of deducting the credit card charge from tips left on a credit card. Where allowed by state law, this is our practice,? Landry?s executive vice president Steven Scheinthal said in a statement. He declined to comment further.

Landry?s policy was upheld in a Houston federal court a few years ago in a class-action suit filed against the chain on behalf of six servers at a Joe?s Crab Shack in Chicago.

The Fair Labor Standards Act permits an employer to deduct the processing fee from an employee?s tip as long as the deduction does not put the employee?s pay below the minimum wage.

In Colorado, the practice invalidates the state?s tip credit, which makes it impractical for employers, said Pete Meersman, chief executive of the Colorado Restaurant Association.

California?s Legislature banned the practice in 2001 after a state superior court decided in favor of the deduction. The state judge had ruled it permissible for Specialty Restaurants Corp. of Anaheim to assess the fee from servers? tips.

 

[guyver01]

Originally posted by: lupi
employer not employee makes the agreement with the CC company.

and? i didnt know there was a law on the books that says that an employee has the right to negotiate with the credit card processor at their place of employment.

i'm pretty sure there's probably something in the employee's contract that gives the employer some sort of "power of attorney" to do the negotiations for their own business.

 

[Bignate603]

Originally posted by: MagnusTheBrewer
The processing fee is normal overhead of a company accepting credit cards and is in no way the responsibility of the waiters. Further, not all tips are charged, So, are they keeping a percentage of all declared tips? This is a sleazy business practice and if they are keeping a percentage of all declared tips whether charged or not then, yes it is against the law. Good waiters have a marketable skill and can easily move to greener pastures. I recommend he/she does so.

If they fee for the card is 5% I don't think there's any issue with it. If the fee is lower than that I think it's not right.

 

[MagnusTheBrewer]

Originally posted by: guyver01
For those saying "This is definitey illegal" ... what law exactly is being broken?

The employer is not required to pay the credit card processing fees. So if someone leaves the tip on a credit card, the fee can be deducted.

The employer is required to pay the processing fee if they want their money for the meal or bar tab. You do not pay a second fee for processing a tip. Taking a percentage of all tips, if they were charged or not, would be stealing.

This is not a smart business practice. This is a few companies trying to find loopholes to force their hourly employees to share the expense of the overhead. You cannot operate a service based company by the bottom line. This has been proven over and over again. The only thing such sleazy business practices accomplish is to guarantee they go broke slowly.

 

[guyver01]

Originally posted by: MagnusTheBrewer
The employer is required to pay the processing fee if they want their money for the meal or bar tab. You do not pay a second fee for processing a tip.

Federal law expressly allows for the practice of deducting the credit card charge from tips left on a credit card.

While, again, this may be "sleazy" or "immoral" ... its legal.

 

[lxskllr]

I'd just deal with it, and hook up my friends with free food. I ALWAYS win in the end :^D

 

[Brainonska511]

It doesn't seem like the best way to retain employees, but it is legal under Federal law. As long as they are only doing it on credit transactions where the tip was left on the credit card and as long as it isn't the entire charge for processing, such as this example from a linked article:

A bill of $100 with a tip of $20. 3% processing fee, so $3.60 in processing charges. Only 3% of the tip ($.60) gets removed from the waiter's tip to cover the expense, not the entire $3.60.

And as long as they tell their employees and not breaking any state laws, I guess it isn't that bad.

 

[Thorny]

Originally posted by: lupi

Originally posted by: guyver01
For those saying "This is definitey illegal" ... what law exactly is being broken?

The employer is not required to pay the credit card processing fees. So if someone leaves the tip on a credit card, the fee can be deducted.

employer not employee makes the agreement with the CC company.

Using that logic the employer would get to keep all of the tip, being that the employee has no agreement with the cc company.

If the employer incurs a fee, I don't think it's unreasonable to be compensated for it. The employer does have the option to not allow CC tips at all, one phone call is all it takes to request reprogramming and have the tip option removed from the reciept. I'll bet the server would rather pay the fee than potentially not recieve those tips at all.

That said, I think it's rather cheap to have such a rule in place. The amount of money saved cannot be worth the PITA and damage to moral. OTOH, I'm not sure we need any more laws restricting small business.

 

[MagnusTheBrewer]

Originally posted by: guyver01

Originally posted by: MagnusTheBrewer
The employer is required to pay the processing fee if they want their money for the meal or bar tab. You do not pay a second fee for processing a tip.

Federal law expressly allows for the practice of deducting the credit card charge from tips left on a credit card.

While, again, this may be "sleazy" or "immoral" ... its legal.

I already said that unless they are keeping a percentage of all tips, charged or not, then, it would be illegal. This kind of thinking is exactly why America is in it's current financial crisis. Just because the government didn't expressly forbid you to do something, doesn't mean that following bad business practices is smart or acceptable.

In service industries there is perhaps a closer relationship between good business practices and success than in any other business. This is not a debate about morals, it's a debate about good business practices which relate directly to a company's long term profitability. Keeping a percentage of tips to offset a service fee that has to be paid anyway is a BAD business practice.

 

[Thorny]

Originally posted by: MagnusTheBrewer

Originally posted by: guyver01
For those saying "This is definitey illegal" ... what law exactly is being broken?

The employer is not required to pay the credit card processing fees. So if someone leaves the tip on a credit card, the fee can be deducted.

The employer is required to pay the processing fee if they want their money for the meal or bar tab. You do not pay a second fee for processing a tip. Taking a percentage of all tips, if they were charged or not, would be stealing.

You don't know how the fees for credit transactions work. There is a per item fee that is charged for every transaction, this is a set fee depending on card type. There is also a percentage of the item total that is charged for every transaction. Any tip that is added to the total will increase the fee associated with that transaction by this percentage.

For example, a bill of $50 charged to a card would result in a transaction fee of $0.15 plus 1.8% of the total, resulting in a $1.05

Now if the patron added a $10 tip to the card, the $.15 fee would remain the same, but the overall fee would jump to $1.23, an $.18 increase.

At my restaurant, my combined fees average out to around 3% of my transaction totals. My store is small potatoes compared to most, so I cannot imagine many restaurants paying a higher fee than that.

Edit to fix quoting

 

[guyver01]

Originally posted by: MagnusTheBrewer
In service industries there is perhaps a closer relationship between good business practices and success than in any other business. This is not a debate about morals, it's a debate about good business practices which relate directly to a company's long term profitability. Keeping a percentage of tips to offset a service fee that has to be paid anyway is a BAD business practice.

From what i've read, the practice is done by Landry's food service.

Landyrs owns or manages the following big names:
Rainforest Cafe
The Golden Nugget Hotels and Casinos
Saltgrass Steakhouse


They seems to be pretty successful.

I'm not saying its NOT a bad business practice.. but it is pretty sleazy if ya ask me...

 

[God Mode]

If you don't like it quit because there is someone that will always replace you and appreciate the job. The same is happening across every industry. American workers outpriced themselves out of the international workforce. Globalization, making the rich richer and keeping chumps happy with their cheaper consumables.

 

[BoomerD]

Originally posted by: guyver01

Originally posted by: MagnusTheBrewer
The employer is required to pay the processing fee if they want their money for the meal or bar tab. You do not pay a second fee for processing a tip.

Federal law expressly allows for the practice of deducting the credit card charge from tips left on a credit card.

While, again, this may be "sleazy" or "immoral" ... its legal.

Yep. A couple of states prohibit such deductions, but it's 100% legal per the FLSA.

http://www.dol.gov/esa/whd/regs/compliance/whdfs15.pdf

"Credit Cards: Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, then the employer may pay the employee the tip, less that percentage. This charge on the tip may not reduce the employee's wage below the required minimum wage. The amount due the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company."

 

[Thorny]

Originally posted by: BoomerD

Originally posted by: guyver01

Originally posted by: MagnusTheBrewer

Yep. A couple of states prohibit such deductions, but it's 100% legal per the FLSA.

http://www.dol.gov/esa/whd/regs/compliance/whdfs15.pdf

"Credit Cards: Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, then the employer may pay the employee the tip, less that percentage. This charge on the tip may not reduce the employee's wage below the required minimum wage. The amount due the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company."

I wonder what is allowed in the event of a chargeback where the employer NEVER recieves reimbursment or compensation. I've had a check come back from the bank that was written just for a tip to the server, I can imagine some bigger stores having large tips left with stolen cards that later get charged back. I wonder if the state thinks the employer be liable to pay for that as well?

 

[MagnusTheBrewer]

Originally posted by: guyver01

Originally posted by: MagnusTheBrewer
In service industries there is perhaps a closer relationship between good business practices and success than in any other business. This is not a debate about morals, it's a debate about good business practices which relate directly to a company's long term profitability. Keeping a percentage of tips to offset a service fee that has to be paid anyway is a BAD business practice.

From what i've read, the practice is done by Landry's food service.

Landyrs owns or manages the following big names:
Rainforest Cafe
The Golden Nugget Hotels and Casinos
Saltgrass Steakhouse


They seems to be pretty successful.

I'm not saying its NOT a bad business practice.. but it is pretty sleazy if ya ask me...

That's exactly the problem. Corporate food service regularly makes poor business decisions because it is extremely difficult to link cause and effect in service organizations and, if you deal in millions, what's a few hundred thou between friends? Couple that attitude with the corporate culture of juggling the numbers to ensure I get my quarterly bonus and you've got a recipe for disaster.

But, don't worry, the top dogs are always willing to sell their shares or move to another company before the long drawn out death of a concept affects them. To hell with the employees and the community.

Long term profitability is a foreign concept to corporate food service. They actually plan for the concept to die. Bennigan's anyone? This is not new but, I know it is a bad business practice. The worst result is smaller companies trying to emulate the corporations without the education, experience and, vision required to discern good business practices from bad. So now, one or two bad decisions by corporations affect the entire industry.

Corporations have no responsibility but to their shareholders while food service is held to a higher standard. The two outlooks cannot be reconciled.