A class action lawsuit threw everything but the kitchen sink at a group of restaurateurs. At the heart of the suit was a tipless policy that defendants had instituted at their various east and west coast restaurants. Defendants claimed that they instituted the policy, along with increasing prices 20 percent, in order to better address issues of rising costs, tip sharing, employee retention, and sustainable income.

No-Tip Policy – Does It Protect or Hurt Workers?

Back in 2014, some Bay Area restaurants and New York’s Union Square Hospitality Group, which includes Shake Shack, led a movement against tipping. They felt the practice was unfair to restaurant workers. But plaintiffs, including anyone who bought food or drink from any of the defendants, claimed “the real aim and effect is greater profit at the expense of workers and consumers.”

How to Protect Your No-Tip Restaurant

Regardless of the suit, the issue of tipping is an ongoing debate, with both sides of the argument having good points. If your restaurant is considering switching to a no-tip policy, keep in mind that a restaurant can’t actually ban tipping. Owners can make all sorts of changes to their establishments, including signs discouraging tipping, eliminating the tip line from credit card receipts, removing tip jars from cashier areas and the like. But if your customers want to continue leaving cash tips, as is the custom in the United States, they can.

If you are interested in implementing a no-tip policy at your restaurant, contact a local business and commercial lawyer to see if there are any legal pitfalls you may want to anticipate prior to making the change. Though this lawsuit was dismissed by the judge, others may soon follow if the movement gains transaction. An attorney can best limit your legal exposure.

Related Resources:

  • Find a Business and Commercial Lawyer Near You (FindLaw’s Lawyer Directory)
  • Is a ‘Service Charge’ a ‘Tip’? Ask the IRS (FindLaw Law and Daily Life)
  • No-Tips For Your Workers? How to Make it Work Legally (FindLaw Law and Daily Life)

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