Parasole restaurants' new policy on tips may be unpopular but it's perfectly legal

Categories: Investigations
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Parasole "can take up to whatever the credit card company takes."
Parasole restaurants' new policy on credit card tips may be unpopular with servers and customers, but it is perfectly legal under state Department of Labor regulations.

Restaurateurs "can take up to whatever the credit card company takes," explains James Honerman of the Department of Labor and Industry.

Which means that as long as the credit card in question charges a 2 percent fee to the restaurant, the restaurant can pass along that 2 percent penalty to the waiter or waitress receiving the tip.

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Michelle Drake says restaurants can excise credit card fees from tips.
"It would be one thing if the employer is keeping the 2 percent," explains Michelle Drake, employment lawyer for Nichols Kaster, "but it's really the credit card company keeping that percentage."

That a credit card tip would go to an employer might be shocking to someone who goes out to dinner, but it isn't all that unusual.

"That's fairly commonplace," says Mike Moberg, a labor attorney. "They're going to make sure the restaurant doesn't get shorted any money."

There's been a lot of chatter on Twitter over the issue, with a number of users questioning the legality of Parasole's decision to charge servers for their tips.

Some have pointed to Minnesota statute 177.4, subdivision 3, which reads, in part:

Any gratuity received by an employee or deposited in or about a place of business for personal services rendered by an employee is the sole property of the employee. No employer may require an employee to contribute or share a gratuity received by the employee with the employer or other employees or to contribute any or all of the gratuity to a fund or pool operated for the benefit of the employer or employees.
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Linda Higgins, state senator, wants to make it easier for employees to share tips with each other.
But that piece of legislation alone doesn't govern the rules, as Honerman and Drake point out. In fact, that section of state law focuses on protecting workers' rights to share their tips with their colleagues if they want.

"When the servers share their tips with people in the back of the house, the employer is not allowed to hold the money for somebody who wasn't there at the end of the shift to get his allocation," explains state Sen. Linda Higgins, who cosponsored an amendment in the last session to make tip-sharing more convenient for employees who wish to share their tips. "This would allow the employee to hold the money for the people until they come in the next day."

Even though they were perfectly within their right to do so, Parasole executives--who did not return a voicemail seeking comment--may be wondering whether the 2 percent pass-along penalty is worth the public relations fiasco that transpired after they posted the new policy last Tuesday and employees alerted the media.

UPDATE: Parasole finally responds to tip-dip controversy

Wow, @Parasole, wow. http://t.co/MBzKCwoZ Not only is it unethical & greedy, it defines the phrase "super boner PR move." (h/t: @jakenyberg)
Oct 03 via webFavoriteRetweetReply

Tip in cash, or stay away from @Parasole restaurants. Servers pay for rising bank fees with their tips: http://t.co/TzWHQubS#parasole
Oct 03 via webFavoriteRetweetReply

As a former bartender/server, what @Parasole is doing in charging employees 2% of credit card tips is wrong. Folks, tip with cash!
Oct 03 via TweetDeckFavoriteRetweetReply


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Parasole restaurants dipping into tip jar, taking 2% of wait staff's credit card tips



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