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Saturday, December 12, 2009

The Tip - "To Pay or Not to Pay"



Tipping is customary practice in the United States in restaurants offering traditional table service. While the amount of a tip is ultimately at the discretion of the patron, the customary tip until the 1980s was from 10 to 15 percent of the total bill before tax, for good to excellent service, and since then has risen to 15 to 20 percent before tax. (www.wisegeek.com) Typically underpaid, waiters, on average, fail to report about 40% of their tips. (IRS Bulletin No. 2002-47, November 25 2002.) Of course, many rely on tips to make sufficient money to exist. 

A surcharge (a standard predetermined service charge (~18%) in lieu of the tip) is a type of "built in" tip added to the bill by some restaurants. The money (at least, in theory) is divided among busboys and other staff; however, some restaurant owners have been known to keep this fee. If customers quiz their waiters about whether they get a portion of that money and the answer is "no," the wise customers leave their waiters the customary tip based on the food bill before tax and surcharge. The customer's intent here is very clear: the message to the owner is to give the money to the appropriate people, not personally gouge prices.



Restaurant surcharges are fairly standard charges for large groups of diners. Reputable restaurants post their policy on a sign or the menu, or require servers to inform their patrons of such charges before they order. Jane Gottlieb of The New York Times (September 15, 2004) stated, "This charge can be verified by the customer on the bill to avoid tipping in addition to the service charge. A service charge is also taxed by the IRS. Customers have a right to negotiate, alter, or refuse charges which were hidden until the bill arrived." ("A Mandatory Gratuity Is Just a Tip, and Thus Not Mandatory, a Prosecutor Says")

But, does a properly posted mandatory surcharge require diners to pay the fee after their dining experience IF THEIR SERVICE OR DINING EXPERIENCE IS INFERIOR?


Humberto A. Tavares and his party, which included his wife, Marie, another couple, and the five children of both couples, were charged $77.43 for their meal, and an additional $13.73 for a tip (that included an 18% gratuity) at Soprano's Italian and American Grill in Lake George, New York, in 2004. The group had decided "the food was not particularly good," and so Tavares did not pay the 18 percent. Insteas, Mr. Taveras said he had left a 10 percent tip.

The Sopranos called the police, and soon Mr. Taveras was arrested and charged with theft of services. He was taken away in a police car, fingerprinted, and subjected to national publicity. He said he eventually paid his lawyer a few hundred dollars to pursue the matter. Eventually, charges were dropped.

In other words, according to Warren County district attorney, Kathleen B. Hogan, "A tip or gratuity is discretionary, and that's what the courts have found." (Jane Gottlieb, The New York Times, September 15 2004) In essense, a mandatory tip is just a tip and customer discretionary, like any other tip. Yet, Mr. Taveras found his legal rights and meal to be very expensive and embarrassing, indeed. 

Evidently, not every legal mind has agreed with this decision. In a blog entry from a Pepperdine law graduate (federalism.typepad.com, September 15 2004), the following summary was sited:

"In People v. McDonald, 689 N.Y.S.2d 600, 604, (N.Y. City Crim. Ct. 1999), the court wrote: "PL 165.15(2) proscribes thefts of restaurant services, as well as thefts of lodging services." However, all the theft of services cases I came upon held the defendant liable, if at all, for the food or beverages consumed. Thus, services seems to mean the tangible food or beverages consumed.

"Thus, at issue is whether a restaurant patron owes money for the services a waitress renders. Ordinarily, you and I are under no duty to leave a tip. A tip is something extra we provide as a reward for services rendered. But, for parties of eight or more, the 18% would not be a gratuity, since according to the menu, parties of eight or more must pay it. Thus, the 18% is best understood as a surcharge - and a non-negotiable one at that."

And, according to the New York City Department of Consumer Affairs (Doctor Barnett, technically.us, October 14 2008), the following policy is in order:
 

5-59. RESTAURANT SURCHARGES
"Restaurants are prohibited from adding a surcharge to the cost of items listed on the menu, i.e., if they want to raise prices, they must change the individual prices on the menu, not just add a surcharge. However, bona-fide service charges for persons sharing one meal, a personal minimum amount, a required surcharge for groups of eight or more, are legal if they are printed on the menu, and take-out businesses are exempt."


All of which leads to a recent example of arrest. The Lehigh Valley Express Times (November 17, 2009) reported Moravian College senior Leslie Pope and John Wagner, a Lehigh University graduate student, were handcuffed and transported from the Lehigh Pub to Bethlehem police headquarters on October 23 after failing to pay a mandatory 18 percent gratuity.

Pope and Wagner were members of a party of eight during happy hour that refused to pay a service charge of $16.35 on top of their $73.87 tab because, according to them, service was "terrible, terrible" and their surcharge was nearly 5 percent higher than the 18 percent listed on the menu.

The group reportedly waited more than an hour for their salad and wings and had to approach the bar themselves for drink refills and to find their own napkins and silverware as their waitress smoked outside.

Reporter David Chang (www.nbcphiladelphia.com, November 23 2009) said, "After the $73 bill came, the group paid for the food, drinks, and tax but refused to pay the tip. After explaining the bad service to the bartender in charge, Pope claimed he took their money and called the police. The police arrived, handcuffed the couple, and placed them in the back of a police car."

“I understand that, you know, we didn’t pay the gratuity, but it was a gratuity, it wasn’t something that was required,” said Wagner.

The owner of the establishment admitted that the group had waited unusually long for their food, but said the pub was extremely busy that night. He said the managers had offered to comp the food, but this was a claim the couple denied ever happened.

The Deputy Police Commissioner Stuart Bedics reported, “Obviously we would have liked for the patron and the establishment to have worked this out without getting the police involved.” Still, the police charged Pope and Wagner with theft. Later, police dropped the charges.

Northampton Count District Attorney John Morganelli stated, “It would not be the kind of case that should be processed criminally. Morganelli continues, “It was one of those matters that should be processed civilly.”

Pope, who has interviewed with media outlets across the country, told The Lehigh Valley Express Times that she was grateful she had be vindicated.“It’s been six days. It didn’t take long,” she said.

NBCPhiladelphia.com received more than 3 million hits for the couple's story alone and more than 2,000 viewers left their comments about the incident.


An attorney for the Lehigh Pub said he was a bit surprised by the news. “We do not agree with the facts as presented in the press last week," Sheenan, the attorney, said. “This is the subject of an ongoing investigation by the Bethlehem Police Department, not Lehigh Pub, and we will defer to them as the legal process plays out.”

How do you feel about mandatory gratuities? I can't understand why the police would handcuff, arrest, and publicly


humiliate people over such a minor matter. Is it their lack of knowledge about prosecuting such behavior or is it their lack of experience in dealing with the issue that makes them react with such a show of authority?

If the dining service or eating experience is not good because of the performance of the restaurant, why pay such a hefty tip? One reader suggests that the restaurant would have to post a statement that declared, "By ordering from our menu, you agree to have this gratuity added to your bill" in order to have proper legal authority.

What about the restaurant? Surely, such stubborn insistence on collecting the gratuity diminishes its reputation. If the manager or owner admits to lousy service, he is essentially saying "expect to be disappointed when you walk through our doors. Just pay the money." A simple, and sometimes expensive, pleasure such as enjoying a good meal should be met with customary good expectations. After all, trust is the real issue involved.



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