Victory for service employees in Hawai'i who can now collect improperly withheld "service charges"
Since 2000, Hawai’i law has placed requirements on hotel or restaurant employers that add service charges to their bills for the sale of food or beverage services. The law requires employers distribute all collected service charges to their service employees—unless the employer fully and clearly discloses to customers that any portion of the service charges will be used by the employer to pay for expenses other than the wages and tips of the service employees.
Many hotel and restaurant employers ignored the law and in 2008 employees filed class action lawsuits against many hotel employers for unlawfully withheld service charges/tips. After 5 years of highly contested litigation and appeals with many hotels who refused to settle their employees' claims, the Hawai'i Supreme Court finally ruled, on July 15, 2013 in Villon vs. Marriott, that these service employees are entitled to sue their employers for these improperly withheld service charges under Hawaii's wage enforcement statutes. In other words, the Court found the money owed to the employees is considered “wages” in this context. Hawaii's wage enforcement laws provide for the recovery of potentially double unpaid wages, interest and attorney fees.
This ruling makes clear to all hotel and restaurant employers that they must turn over all service charges collected from their customers to their service employees, unless they clearly disclose to customers that service employees won’t be receiving that money. Employers must make these disclosures, or risk being sued for unpaid wages, civil penalties, interest and attorney fees. Villon vs. Marriott and related cases were handled by Ashley Ikeda of Weinberg Roger & Rosenfeld.
More information regarding California’s laws on this issue can be found at the Labor Commissioner’s website. (See also, http://callaborlawblog.com/common-california-labor-code-violations/the-top-ten-things-you-need-to-know-about-california-tips-law/). To further discuss service charges, whether in Hawai’I or California, contact your labor law counsel.