Chowhound is a weekly column about what’s trending in Detroit food culture. Tips: [email protected].
Forcible retainers: Answering our recent call for case-makers for change in the food service industry, Chowhound reader Laura Buus came forward with questions on tips and service charges, which consumers understandably conflate into what they consider gratuities for hard-working hospitality staff. Buus’s query echoed countless many I’ve answered over the years. Now, as tip inflation and fatigue strike nerves in current food marketplace conversations, Buus bristles on behalf of a growing mob feeling jobbed over added layers of service charge and tip lines customers are feeling obliged to fill in of late.
“Is it legal in Michigan to add on a forced gratuity?” Buus wondered. Not surprisingly, Laura, the answer in legalese first requires we make some semantic distinctions. In the eyes of the law, a “tip” is a sum of money a customer decides to leave over and above billed charges, while a “service charge” (designated as such) is simply considered part of what a business bills for its goods and services. While Michigan and federal labor laws both make clear that tips belong to employees receiving them, they do allow for service charges to be distributed as an employer sees fit, by and large. That distinction might help explain what many perceive as greedy attempts to “double dip” for gratuities; once through a “service charge,” then again via that “additional tip” line. While my experience as a restaurateur inclines me to believe the majority of service charge monies are paid out to tipped employees, the fact that we’re seeing such proliferation of mandatory service charges across a severely stressed restaurant industry makes me wonder why so many operators have taken to a practice generally considered taboo in terms of public perception. Forty years of work in the business leaves me convinced that 90% of restaurant goers take pride in tipping to standard or above. Feeling the need to enforce their generosity rings false in my opinion, due to the PR risk of offending customers which, clearly, has come as a consequence. That so many food businesses seem willing to take that risk speaks — also in my opinion — to desperation for increased revenue and the dire straits restaurants find themselves in these days.
Laura’s follow-up question voices some understandable concern: “Who gets to keep it (the service charge)?” Where it all goes, who knows? All I can tell you is where “tips” can’t go by law, and that’s into the pockets of owners, managers, and staff supervisors. If any monies marked on tip line receipts are collected and kept to any degree by people holding those positions (save for card payment processing fees), the tipped employees working under such conditions would have a legitimate beef. But again, monies collected as mandatory service charges belong to the business, and may be distributed at the discretion of ownership. On that note, I’d love to hear from some servers and operators out there whose workplaces have implemented these charges. What’s your take, and how is it working out for everyone concerned?
The final answer to your first question, Laura, is yes: It is legal to add on a mandatory service charge. Don’t see it as a gratuity your server gets. It may or may not be, which makes leaving that tip line blank something more to consider (odd, though, when listed as “additional tip,” which I’ve noted on occasion). During my days as a restaurateur, tips and service charges were all the same to me. I never touched them. There were no costs of business I could justify having servers pay with money customers assumed was theirs to keep.
Lastly, Laura, you asked: “What if someone refuses to pay that addition?” Honestly, the last thing I’d want to do is haggle over that at the end of a meal. I’d suggest finding out if service charges apply at a place prior to eating there. At dinner with a friend recently in Greektown, our server informed us of the place’s service charge policy when we sat down. I’m good with that, and I think restaurants might do well to adopt that practice going forward. It makes everything feel above board. And restaurateurs, please note: In Ms. Buus’s email to me, she twice used the term “forced gratuities,” rather than “service charges.” Perception is reality, and choice is a crucial aspect of appeal to the consumer. For generations, restaurant goers have generally had the choice of how to tip. Changing the game across the board here seems like risky business. Will it pay off? We’ll see. Personally, I don’t feel the practice of tipping was broken or in need of this fix. To the contrary, generosity took an upswing during the COVID-19 pandemic. Granted, maybe it’s come down to Earth some since. Still, I don’t think what ails the restaurant industry these days can be cured by a forced shot in the arm that comes at the expense of insulting a public whose generosity seems suddenly called into question. Already, the backlash appears considerable.
As a Band-Aid on food businesses bleeding money these days, service charges may or may not stem the tide of restaurant casualties sweeping across the industry. Operators offer various reasons for them; some transparent, citing “living wage, employee healthcare contributions,” and even one case of flat-out lousy “industry conditions,” that I’m aware of. Even so, it makes me question why an entire segment of the economy is turning to, essentially, a 5-10% added tariff on all its goods and services. When I remember how slim the profit margins are to begin with, it makes more sense. Innkeepers can’t afford to absorb any more costs and still make a living. In so many cases, it’s come to that.
Consumer questions regarding mandatory tipping and/or service fees can be addressed to:
The Michigan Attorney General Consumer Protection Division
P.O. Box 30213
Lansing, MI 48909
517-335-7599 (toll free): 877-765-8388
Online complaint forms available at: michigan.gov/ag/consumer-protection
See also: Fair Labor Standards Act (FSLA), Payment of Wages and Fringe Benefits Act 390 (1978).
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