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Food Is It Legal for Restaurants to Include Mandatory Tip?

16:45  22 september  2019
16:45  22 september  2019 Source:   rd.com

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When the waitress gave us our check, it included a mandatory 18 percent tip . The change actually came in June 2012, when the IRS issued Revenue Ruling 2012-18, which said that the mandatory extra fee restaurants often add to large parties is not a “ tip ” at all.

Restaurants can include a service charge. Some people mistakenly assume automatic service charges are tips , but this is revenue or property for the restaurant —not necessarily the employee So it ’s technically not a “ mandatory tip .” And yes, it ’s legal for restaurants to include this fee.

Sometimes it's a challenge to figure out how much to tip after a nice meal. Restaurants occasionally include helpful info at the bottom of the check where they calculate a 15, 20, and 25 percent tip—making it that much easier to leave some money for your server. If you take a closer look at your bill, you might also see a fee, but don't mistake it for a mandatory tip.

a close up of text on a white background© Chumakov Oleg/shutterstock

There's no law requiring customers to leave a tip

No law exists requiring customers to leave a tip, according to Abe Cohn, Managing Partner of Cohn Legal, PLLC. If something is mandatory, it's technically not really a tip, according to Jordan Bernstein, a Los Angeles-based attorney representing chefs and hospitality practices. The IRS defines a tip as something optional or extra that only the customer determines, Bernstein says.

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To tip or not to tip can be a source of contentious debate, but at some point nearly every diner has been presented with an unexpected (and perhaps unwarranted) “ mandatory gratuity” or service charge. Schlueter, Roger. “Answer Man: Is It Legal For Restaurants To Include Mandatory Tip ?”

So I'm trying to find out if that was legal for them to increase the base for the mandatory tip like that since it was not a part of the service. My question has to do with the fact that they also included the total of the loose leaf tea I purchased from them at the end of the meal to take home and enjoy later.

Restaurants can include a service charge

Some people mistakenly assume automatic service charges are tips, but this is revenue or property for the restaurant—not necessarily the employee, Bernstein says. So it's technically not a "mandatory tip." And yes, it's legal for restaurants to include this fee. "Sure, it's legal, and in fact, restaurants have been using them for large parties for years," Joe Bogdan, a partner in the law firm of Culhane Meadows says.

Servers don't always see the money from service fees or charges because restaurants aren't required to pass that money onto staff, attorney Scott Perlmuter explains. Think of it more as a cover charge than a tip for your waiter. Some restaurants do choose to give servers some of this money and apply the portion they give against their minimum wage obligations, Perlmuter says. Anything leftover goes to the restaurant. This strategy is one of the reasons why service charges are gaining popularity, according to Perlmuter. So although this fee adds to the bottom line cost of your meal, it's not necessarily direct money in the pocket of your server. And it's one of the things your server wishes they could tell you.

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However, I'm wondering if it is legal for restaurants to do that . We dined at a restaurant this past sunday and when they brought the bill, they added a 15% tip on the bill (about ). When I asked, the waiter said it is their policy to add a 15% tip when theres a party of 6 people or more.

For restaurants that include a mandatory tip in the bill, should the tip be calculated on the pre-tax amount or post-tax amount? Should you leave a tip for the waiters if the service charge is added to the restaurant bill already? How do you feel about tips being included onto your bill at restaurants ?

Specific rules depend on where the restaurant is

Service charges might be legal, but both the IRS and the Department of Labor regulate them, Perlmuter says. "As a general matter, it's important to understand that laws and regulations concerning restaurants operate on the level of the State and local governments," Cohn adds. "Therefore, depending on the location of the restaurant, different laws will dictate what is necessary and acceptable." There are various laws about tip credit per state and other rules regarding tips that are more complicated. If you're out of the country, you need to know these tipping etiquette rules from around the world.

If a restaurant charges automatic gratuity, it must be made clear

Restaurants must let customers know in advance of the surcharge for automatic gratuity for large parties. "It is entirely acceptable and indeed common, for a restaurant to add an additional 20 percent gratuity charge on a bill with eight or more guests," Cohn says. "But such a fee is only permissible if the policy is made abundantly clear to the customers before the order is placed." That's why you'll often see in small print "parties of eight or more will incur a 20 percent gratuity fee."

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Mandatory tipping (also known as a mandatory gratuity or an autograt) is a tip which is added automatically to the customer's bill, without the customer determining the amount or being asked. It may be implemented in several ways, such as applying a fixed percentage to all customer's bills

The reason is that tips are by nature voluntary and an add-on for good service, eHow explains. But this service charge may be legally enforceable, as it is no longer characterized as a tip and, arguably, is therefore not a Though some restaurant owners have resorted to legal action (as happened in

Finally, it's essential to remember that restaurants, like nearly all business, have the right to "set the rules of engagement" with customers, according to Cohn. So if a restaurant wants to charge an automatic gratuity, it's perfectly within its right to do so. However, the restaurant does not have the right to deceive its customers, so any agreement must be fully transparent and readily understandable. Although, some restaurants do have menu secrets they won't tell you.

Related video: This is how much you should be tipping for room service [via Buzz60]

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