Department Of Labor’s Internal Memorandum Provides Insight On Investigations Of Facilities Which Provide Banquets Or Special Events

By now, the impact of the New York State Court of Appeals' decision in Samiento v. World Yacht Inc., 10 N.Y.3d 70 (2008), is well-known throughout the hospitality industry. Conscientious venues have reviewed, and when necessary, modified their banquet or private event contracts to clarify and explain that mandatory charges in addition to the food and beverage costs are not gratuities. Part of this internal review usually involved eliminating the term "service charge" particularly since the 2011 Hospitality Industry Wage Order explicitly stated that "[t]here shall be a rebuttable presumption that any charge in addition to charges for food, beverage . . . including but not limited to any charge for "service" or "food service" is a charge purported to be a gratuity."

On August 21, 2013, Carmine Ruberto, the New York State Department of Labor's (DOL) Director of Labor Standards, issued a memorandum to all of the DOL's Labor Standards staff clarifying how investigators should audit "possible tip appropriation at facilities which provide banquets or special events." These DOL guidelines provide that investigators must apply two different standards based on the timing of the banquet or special event. With respect to banquets which occurred after the implementation of the Wage Order for the Hospitality Industry (Wage Order) on January 1, 2011, investigators are required to examine whether the employer provided a notice that would make the reasonable customer understand that "the charge [was] for administration [and] was not a tip for employees." Mr. Ruberto further explained that the notification should be provided on a contract, menu, price list and bill that clearly states in plain language and in 12-point font that the administrative charge is not a tip and will not be distributed to employees.

For events that occurred prior to the 2011 implementation of the Wage Order the DOL states - contrary to several judicial opinions - that use of the term service charge may not, in and of itself, create a presumption that a reasonable customer would understand the charge to be a gratuity. Indeed, Mr. Ruberto directed DOL staff to examine the "totality of the circumstances" and to request...