An Atlanta native, I happily took my first job in a restaurant in Atlanta, Georgia where I worked as a hostess, server, and bartender throughout college. After graduating from law school, I launched my legal career at an international law firm where I represented clients ranging from individuals and small business owners to international automotive companies and manufacturers. Throughout my career, I have advocated for clients in various civil matters including commercial and real estate contract disputes, partnership disputes, business torts and trade secrets, employment litigation, and intellectual property litigation. Returning to my hospitality roots, my practice now focuses on defending and counseling primarily hospitality clients in employment matters. I have been fortunate to learn from some of the best and brightest legal minds in the country and look forward to sharing my personal experiences with the hospitality industry and the legal expertise I have developed since the beginning of my career.
I also recently co-founded a 501(c)(3) non-profit organization called Power Suit Project (PSP) whose mission is to provide opportunities for Atlanta women to build lifelong meaningful professional relationships with other women. Through my role as CEO and President of PSP, I have learned invaluable management, operational, and “people” skills that I look forward to sharing with my clients. While PSP has certainly made me a better businesswoman and lawyer, the most rewarding part of my role with PSP is having the opportunity to inspire and mentor other women.
August 31, 2018 • Ashley S. Nunneker, Rachel Zisek
Category: Legal Updates
Hospitality guests have historically used gratuity to acknowledge their service staff’s excellent work. Employees have come to expect and rely on gratuities, as they now often form the majority of their incomes. Restaurants also sometimes charge guests mandatory fees instead of, or in addition to, gratuity. Yet employers often mislabel, mishandle and commingle gratuities and service charges, which can have serious legal implications. Understanding the differences between a gratuity and a service charge is critical. Below, we demystify these payments and explain how to limit your exposure through best practices.
Gratuities are Voluntary. Simply put, a gratuity is a voluntary amount paid by a guest in recognition of services performed. The amount of a gratuity is left to a customer’s discretion and is optional. Because a gratuity is voluntary, the term “automatic gratuity” is a misnomer. Although the terms “tip” and “gratuity” have been used interchangeably, we prefer “gratuity,” as it is industry standard.
Properly classifying a payment as a gratuity is essential, as certain states (including Arizona, California, Florida, Georgia, Massachusetts, New York, and Washington) do not subject gratuities to sales tax. It is also important to correctly identify which employees are eligible to receive gratuities, as litigation surrounding who can participate in a “tip pool” has become increasingly prevalent.
We have identified the following key traits of a gratuity or tip:
- Customer determines the amount;
- Not subject to sales or income tax;
- Not included in calculation of employees’ overtime rate of pay;
- Employer responsible for withholding taxes only from those gratuities it administers through payroll (i.e. credit card tips and tip share); and
- Not considered “sales” and not reported on the employer’s gross revenues.
Best practices to limit exposure: - Present the bill to the guest with the gratuity area left blank, so the guest may voluntarily write in the amount. Take this opportunity to also inform guests that gratuities are optional. - You may provide “suggested gratuity” calculations, provided that the guest ultimately decides the amount. - Be sure to use terms consistently on all payroll records to dispel any uncertainty surrounding the payment. For example, if you administer credit card gratuities or tip share through payroll, use the term “gratuity” on employees’ paystubs if that is the term used on guest bills.
Service Charges are Mandatory. A service charge is a compulsory amount imposed by the venue, usually included as a percentage of the total bill. Unlike gratuities, guests are not given discretion to determine the amount or recipient. To further complicate matters, certain venues refer to service charges as “auto-gratuities” on bills. Remember, if the guest lacks discretion in the amount and recipient of the payment, it cannot be treated as a gratuity. Common examples of service charges in the hospitality industry include large-party charges at restaurants, bottle service charges at restaurants and night clubs, room service charges, and luggage assistance charges at hotels.
Key characteristics of a service charge include:
- Venue determines the amount;
- Recorded in gross receipts and subject to income tax;
- Included in calculating overtime rates of pay if distributed to employees; and
- Subject to employer and withholding taxes if distributed to employees.
Best practices for handling service charges:
- Some states and localities require employers to distribute 100% of service charges to customer-facing staff (for example, California and New York). Other jurisdictions allow the venue to decide whether to retain all or a portion of a service charge or to distribute some or all to employees (Georgia and Florida, for example). We recommend distributing service charges to service staff, even if you are located in a jurisdiction that allows the venue to keep a portion.
- If you distribute a portion of a service charge to employees, ensure they are paid within the same pay period they are earned.
- If you do decide to provide guests an option to tip on top of a service charge, provide a blank line on the bill for the guest to write in an “optional gratuity” rather than “additional” gratuity. The word “additional” incorrectly suggests that the service charge is also a gratuity.
- State and local regulations vary on the requirements for communicating service charges to guests on menus and receipts. We recommend plain language and 12-point font to ensure compliance across state lines.
- Never merge a mandatory service charge with a gratuity on a bill into one amount. Each payment should be clearly and separately identified on the bill.
States also differ regarding other fixed charges like delivery fees. Some states consider a delivery charge to be a gratuity if a reasonable person would believe the charge would rightfully belong to an employee, while others firmly label these amounts as service charges.
Bottom line: consult with counsel to ensure that your service charge and gratuity practices are compliant with the laws where you conduct business.
For a PDF version of this article, click here.
August 14, 2018 • Ashley S. Nunneker
Category: Legal Updates
Oregon’s “Fair Work Week Act” requires covered employers to provide employees with advanced notice of their work schedules. The new law applies to employers in the large retail, food service and hospitality industries with more than 500 employees worldwide and at least one or more hourly employees working in the State of Oregon.
For new hires, covered employers must provide new employees with a written “good faith estimate” of the employee’s typical work schedule including the expected median number of hours per month and whether employees can be expected to work on-call shifts.
For all employees, employers must provide employees with notice of their work schedules at least 7 days before the period covered by the schedule begins. The 7-day notice period increases to 14 days beginning July 1, 2020.
If an employer adds an additional shift to an employee’s written work schedule, the employee may decline the new shift. If an employer subtracts hours from an employee’s scheduled shifts, the employer must pay the employee one-half of the employee’s regular hourly rate for each scheduled hour that the employee does not work due to the change.
What Does This Mean for You?
If you are a covered employer, you should take immediate steps to train your managers and HR teams on the law’s requirements and update your employee handbooks, policies, and training materials. Finally, there are exceptions to the penalty requirements, so call Stokes Wagner for guidance on navigating and complying with the Fair Work Week Act.
October 30, 2017 • Ashley S. Nunneker
Category: Legal Updates
An amendment to the New York City Human Rights Law, effective October 31, 2017, prohibits New York City employers from considering job applicants’ salary histories. Here are the details:
The Amendment Prohibits Employers From:
- Inquiring about an applicant’s salary history; or
- Relying on an applicant’s salary history when making decisions about an applicant’s salary at any time during the hiring process.
What Does “Inquire” Mean? Employers may not ask an applicant or their former or current employers about the applicant’s salary histories, nor may they search public records to obtain information about an applicant’s salary history, unless the job applicant is a current employee of the employer.
What is “Salary History?” The law defines “salary history” broadly to include wage, benefits, equity, deferred compensation, and any other forms of compensation.
What Can Employers Do? - Consider salary history if the applicant’s disclosure is made “voluntarily and without prompting;”
Consider prior salary and compensation of current employees seeking promotions or transfers;
Ask about an applicant’s salary expectations;
Discuss the anticipated salary range for the position;
Discuss benchmarks for compensation, such as revenue or sales goals; and
Discuss whether the applicant will forfeit equity or deferred compensation by taking the position.
Penalties for Noncompliance A violation of this new law may automatically be deemed an unlawful discriminatory practice. An applicant’s rights under this new law may be enforced before the New York City Commission on Human Rights or in court. Pursuant to the New York City Code, a civil penalty for an unlawful discriminatory practice may be imposed of up to $125,000 for unintentional violations and up to $250,000 for willful and malicious violations. A successful plaintiff in a civil lawsuit may recover back pay, front pay, compensatory damages and attorney’s fees.
Are You in Compliance? Stokes Wagner recommends that you review all job postings, applications (paper and digital), and hiring documents to ensure removal of any and all inquiries regarding salary history. You should also inform all employees involved in the hiring and recruiting process of the parameters of the new law, especially third-parties or outside vendors who participate in the hiring process on behalf of the employer.
Questions? Feel free to call us to discuss your hiring process and ensure compliance with this new law.
The City of New York enacted the following bills affecting fast-food employers, effective November 26, 2017:
No More “Clopening.” Employers are banned from scheduling employees to work consecutive night and morning shifts with fewer than 11 hours between shifts. If the employer requests an employee to “clopen,” the employer must pay an additional $100. There is an exception for employees who request to “clopen” (Intro. 1388).
Current Employees Are Favored. Employers must offer all available work hours to current employees until interested employees are required to receive overtime pay, or until all current employees have rejected the available hours, whichever comes first (Intro 1395).
Fair Workweek. Employers must provide employees with an estimate work schedule upon hire and provide regular 7-day work schedules with 14 days’ advanced notice. Employers must also pay a premium when making a scheduling change.
$10 for each shift added with less than 14 days’ notice but at least 7 days’ notice.
$15 for each shift added with less than 7 days’ notice.
$20 for each shift cancelled or subtracted, with less than 14 days’ notice but at least 7 days’ notice.
$45 for each shift cancelled or subtracted with less than 7 days’ notice, but at least 24 hours’ notice.
$75 for each shift cancelled or reduced less than 24 hours before the shift.
Contact Stokes Wagner for details about premium pay mandates and exceptions (Intro. 1396).
Payroll Deductions. Employers must provide employees with the ability to make voluntary contributions to eligible non-profit organizations through payroll deductions. The law establishes a minimum contribution of $6 per biweekly paycheck and $3 per weekly paycheck to minimize burden to employers (Intro. 1384).
For more legal updates, check out our update for September 2017!