• Susan Eder

Restaurant Owners on Fire!

We recently hosted another Restaurant Owners Discussion Group in Minneapolis, and were honored to include a presentation and valuable information on the implementation of Service Charges from Jason Raether of Pruvent Law Firm.


The feedback from Restaurant Owners was clear: given the rising wages in Minneapolis and St. Paul, Owners must consider other sources of income to sustain their profitability. Many Owners wanted to know how to implement Service Charges - which Jason recommends calling Administrative Fees - and the pros and cons of implementation. There are many pitfalls to avoid, and being knowledgeable about the correct way to implement is imperative.


Here is an excerpt from Jason's presentation:


"A couple (of) owners asked whether a restaurant can inform customers that they do not need to tip. I was unable to find Minnesota law that directly addresses this question, but I would still advise against the practice.


The Minnesota Fair Labor Standards Act specifically defines gratuities as part of wages and, arguably, the Department of Labor could find this notice is an obstruction to an employee receiving their wages. Also, I would not be surprised if a plaintiff firm would attempt a “test case” if a restaurant instituted this notice. I know that some industries handle this differently, but restaurant customers reasonably expect a tip is part of their server’s compensation. If this was tried in the courts, this “reasonable expectation” would likely be a factor in the court’s decision.


Restaurants are better off communicating the administrative fee with a positive message, such as emphasizing that the fee is meant to ensure that all restaurant staff receive adequate compensation and benefits. This sends approximately the same message without the potential for liability described above.


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Please note that the above is not intended as legal advice and Jason is not rendering an opinion regarding any specific restaurant’s policies, which would require a formal engagement with Pruvent Law Firm.


To be included in our next Restaurant Owners Discussion Group, please send a message through the Cue "Contact Us" page. We started this group as a way to connect Restaurant Owners, and welcome all Owners to join us in the discussion.

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