A class action lawsuit, brought by staff at the elite Harvard Club of Boston, has been settled by the club for $4 million.
Our Boston employment lawyers understand the dispute arose from years of a practice that involved billing patrons a “club charge,” which was promoted as a charge paid in lieu of gratuity. However, that money was not subsequently redistributed among the staffers, who claimed this was in violation of Massachusetts tip laws.
The fact is, Massachusetts has some of the most stringent laws with regard to service worker compensation. There are federal guidelines that dictate this issue as well, but under state law, specifically General Law Chapter 149, Section 152A, a violation is punishable by a $25,000 fine, and/or 1 year of imprisonment.
The law is very clear on this issue. It defines a “service charge” as a fee that is charged by an employer to a patron in lieu of gratuity to the staff. Even if it is not expressly called that, the only requirement is that it is a fee that any consumer might reasonably expect to be given to the staff as a tip.
The law goes on to say that no employer is allowed to demand that a service charge be deducted from tips, and further that any tips collected by the employer must be paid directly to the staff either at the end of the business day, or, at the absolute latest, at the end of the employee’s pay period.
Violators of this statute are not only subject to the penalties described above, they also have to repay to employees all of the back tips, plus 12 percent interest. Workers have up to three years to bring action against an employer for alleged violation of any part of this law.
It’s important for both employees and employers to educate themselves on the Massachusetts tip law.
In this case, the complaint was originally filed last November, while the workers and the club administrators were in the midst of contract negotiations. The wait staff and dining hall workers were represented by a local labor union. The club, which is a private company not affiliated with Harvard University, is only open to graduates of Harvard and of other select universities and colleges.
The clincher in this case was an advertisement that was sent by club administrators, trying to reel in old patrons and new clients. The booklet advertised a surcharge paid at the end of meals, as a substitute for gratuity. This was despite the fact that employees were not being paid tip money.
It’s been speculated that this has been happening for decades, and that it likely would have continued, had one of the union members not pressed the issue in court.
The whole case did not reflect well on the club administrators. One Harvard student was quoted by the local newspaper as saying that he regretted the club’s association with the university, and that the elite are enjoying fancy meals at the expense of service workers.
To be fair, the workers were still being paid for their service. However, given all the facts, the club may have been on the wrong side of the law on this one.
Administrators deny that, saying in a letter to patrons that settling the lawsuit for $4 million was a strategic decision from a risk management standpoint. The club wanted to avoid a protracted legal battle and the divisiveness that inevitably ensues.
If you have questions about the application of the Massachusetts tip law, we can help.