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In <a href="http://www.llrlaw.com/pdfs/Four%20Seasons%20summary%20judgment%20decision.pdf">an August decision from a federal court in Hawaii</a>, a hotelier was found liable for unpaid wages to a group of over 100 wait staff employees who claimed the company cheated them out of tips by retaining a portion of gratuity fees added to guest checks. The Planitiffs' factual allegations focused on the fail&shy;ure of management to disclose that 100 percent of the &ldquo;service charge&rdquo; added to resort customers&rsquo; food and beverage bills would not be distributed to wait staff. In connection with this factual claim, Plaintiffs pointed to two Hawaii state wage laws:
<a href="http://www.capitol.hawaii.gov/hrs2006/Vol11_Ch0476-0490/HRS0481B/HRS_0481B-0014.HTM">Hawaiian statute, section 481B-14</a>, which requires service charges applied by hotels or restaurants to be distributed as &ldquo;tip income&rdquo; unless it is clearly disclosed that the service charge will be used to pay some&shy;thing other than wages or tips of employees.
<a href="http://hawaii.gov/labor/wsd/pdf/Unpaid%20Wages.pdf">Hawaii Revised Statutes, section 388-6</a> concerning &ldquo;Withholding of Wages.&rdquo; This statute prohibits employers from deducting, retaining or otherwise causing not to be paid &ldquo;wages&rdquo; to an employee. &ldquo;Wages&rdquo; under Hawaiian law are broadly defined to include &ldquo;tips or gratuities of any kind.&rdquo;
The hotelier's arguments that the Hawaii statutes at is&shy;sue were ambiguous and inconsistent with the Fair La&shy;bor Stan&shy;dards Act were rejected by the Court, which noted that states are free to provide greater protections to employees than that set forth under the FLSA. A trial will be held at a fu&shy;ture date to determine the amount of damages the employees are entitled to receive.
The Bottom Line: Employers must be cog&shy;nizant of the wage laws of the states in which they oper&shy;ate and recognize that such laws may provide greater protections than the FLSA. While the FLSA clearly excludes nondiscretionary service charges from the definition of &ldquo;tips,&rdquo; some state laws may not, or may re&shy;quire the employer to take additional steps to ensure such fees are not owed to employees.
Read additional details about this case on our sister blog, <a href="http://www.hospitalitylawg.com/">HospitalityBlawg</a>.

Court Finds That Employer’s Failure to Pay “Service Charges” To Tipped Employees Violated Hawaiian Law