Massachusetts Courts Have Spoken: Guidance Regarding No-Tipping Policies

The change in tip jars quickly adds up, and can especially add up in Massachusetts, where the failure to lawfully distribute tips among wait staff employees may subject a restaurant to mandatory triple damages. The Massachusetts Tips Act (Tips Act), with its complexities and nuances, has vexed restaurants throughout the Commonwealth since its inception in 2004. Whether restaurants and franchises permit wait staff employees to accept tips or not, there are important aspects of the Tips Act employers should be aware of.

 The Tips Act prohibits employers from retaining, demanding, requesting, or accepting any tip or service charge given by a patron that is intended for a wait staff employee.  A “tip” is defined as any gift or gratuity “given as an acknowledgement of any service performed” by a wait staff employee. A “wait staff employee” is any employee in a restaurant responsible for directly serving beverages or food to patrons or for clearing patrons’ tables, and who does not hold any managerial responsibilities. Potential violations of the Tips Act arise when a restaurant withholds tips and gratuities from its eligible employees, allows for tips to be pooled with management-level employees, or requires its wait staff employees to share a portion of their tips with non-eligible employees at the end of a shift. The stakes can be high for restaurants to ensure compliance, as a Tips Act violation will pay mandatory treble damages, attorney’s fees, and litigation costs.

The stakes can be high for restaurants to ensure compliance.

In 2015, the Supreme Judicial Court (SJC), the highest court in Massachusetts, ruled that businesses can lawfully maintain and enforce no-tipping policies, but with certain caveats, making full compliance with the Tips Act far from simple. The lawsuit, bringing in to question the no-tipping policies of several Dunkin Donuts franchises, arose as a direct challenge to the legality of these policies under the Tips Act. The employees who filed suit claimed that the no-tipping policies deprived them of an opportunity to earn tips from patrons. Moreover, when patrons left tips despite the no-tipping policy, Dunkin Donuts instructed employees to place the tips in the appropriate register. Contrary to patrons’ intentions, Dunkin Donuts was keeping the tips rather than remitting them to wait staff employees.

Although the court found that a no-tipping policy is consistent with the Tips Act, it cautioned that restaurants with no-tipping policies were still obligated to ensure compliance with the Tips Act. This decision clarified that employers were required to communicate the no-tipping policy clearly to patrons. Otherwise, the employer could not retain any tips left by patrons. For instance, patrons who left tips ignorant of the policy would reasonably believe that the tips would be remitted to the appropriate employees. As a result, the Tips Act would require restaurants to distribute these tips to said employees.  In contrast, where the existence of the no-tipping policy is communicated clearly to patrons, no patron could reasonably believe that the tips were intended for the wait staff employees. The restaurant is therefore entitled to keep the tips because it would not violate the patrons’ intentions.

This decision has sent a clear directive to restaurants regarding no-tipping policies. Although such policies may be lawfully implemented and enforced, restaurants must follow certain guidelines to ensure compliance with the Tips Act:

• A restaurant that has a no-tipping policy must decide whether it will clearly communicate the existence of the policy to patrons. Restaurants may have reasons as to whether or not they wish to communicate the existence of no-tipping policies to its patrons, which will affect how any tips are treated.
• No-tipping policies should be communicated with clear and conspicuous signs and postings. Restaurants should consider notifying patrons of the no-tipping policy by placing signs on the register, at the door, or other clearly visible areas.  The sign should also notify patrons that any money left will not be treated as a gratuity and will not be remitted to wait staff employees.
• If the no-tipping policy is not clearly communicated to patrons, then tips must be distributed to eligible wait staff employees.
• Employees with managerial responsibilities are expressly excluded from the definition of a wait staff employee under the Tips Act and are not eligible to share tips. Only those responsible for the service of beverages or prepared food directly to patrons and/or the clearing of patrons’ tables are eligible to share tips that are left by patrons and must be remitted to wait staff employees.
• Restaurants should not take any adverse actions against any employee who complains or raises concerns about tip distribution, regardless of whether the complaint has any merit. Massachusetts prohibits employers from retaliating against employees for raising concerns about wages, and a court may treat concerns about tips as falling within the ambit of “wages.”

The courts have spoken with clear directives regarding the legality of no-tipping policies under the Tips Act, and it is the restaurant’s responsibility to ensure compliance. Given the steep penalties for violating the Tips Act, employers should proceed carefully and consult with their counsel when contemplating and implementing a no-tipping policy.