December 11, 2019

December 11, 2019

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December 10, 2019

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December 09, 2019

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Employer’s “Service Charge” May Be A Gratuity Owed To Employees

In this putative class action, banquet server and bartender Lauren O’Grady alleged that her employer’s practice of automatically imposing a 21 percent “service charge” to every food and beverage banquet bill constituted a gratuity that had to be fully paid to nonmanagerial service staff employees pursuant to Cal. Lab. Code § 351.

The trial court sustained the employer’s demurrer to the complaint on the ground that a service charge can never be a gratuity. The Court of Appeal reversed, observing that the terms “tip,” “gratuity,” and “service charge” are not “interchangeable synonyms” and that “service charge” is a “protean term of no fixed meaning.” Accordingly, the Court held that plaintiffs might be correct that the custom in the hospitality industry is to treat sums designated as “service charges” as gratuities for employees within the mean of Section 351.

O’Grady v. Merchant Exchange Prods., Inc., 2019 WL 5617001 (Cal. Ct. App. 2019)

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About this Author

Anthony J Oncidi, Employment Attorney, Proskauer Rose Law Firm
Partner

Anthony J. Oncidi heads the Labor & Employment Law Group in the Los Angeles office. Tony represents employers and management in all aspects of labor relations and employment law, including litigation and preventive counseling, wage and hour matters, including class actions, wrongful termination, employee discipline, Title VII and the California Fair Employment and Housing Act, executive employment contract disputes, sexual harassment training and investigations, workplace violence, drug testing and privacy issues, Sarbanes-Oxley claims and employee raiding and trade secret protection....

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