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

Categories: Investigations
Parasole Restaurants2.jpg
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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35 comments
Teransc
Teransc

Guess Chino can suck it after all... too bad I was just craving that place.

Teransc
Teransc

Always pay or tip in cash. 

John
John

Tip the servers in cash so they can short Uncle Sam his 25%.

Thevm
Thevm

I worked for Parasole for years.  They are smart, innovative business people with a great track record in our business.  Having said that, there is no reason to NOT single Parasole out simply because EVERYONE seems to have adopted this greedy policy.  Besides, no amount of investigative pieces or internet posts or boycotts will change this.  Only a change in the law will.

Conrad_nix
Conrad_nix

Dear Parasole,Karma. Just think about the 7.25 an hour they get payed?

CJ
CJ

I would propose that Parasole give a discount for paying the entire bill in cash.  Conventional wisdom is that the fees are accounted for in the prices a restaurant charges. I have many places that I do business with that would prefer cash and reward me for paying that way.

Cheechlweiss
Cheechlweiss

Once again, the little guy has to pay so corporations/business owners make more. It isn't enough that these people bust their rear ends now they have to pay money to the "boss." TIP IN CASH

jill
jill

Parasole is not the only restaurant doing this....CRAVE takes 2% of the total bill and deducts from the servers tips. They are basically passing the credit card fees onto the servers...

Bill Crosby
Bill Crosby

Are the servers allowed to eat food while on break?  And if so, is it discounted for them and all their hard work?  I'm asking seriously here.

sucks to be a server
sucks to be a server

There are other restaurants in TC area that are doing the exact same thing. I used to work at Naviya's Thai Brasserie in Linden Hills. They actually took 3 or 3.5% from the servers' total credit card sale .. yep .. total credit card sale and not the credit card tip. Outrageous!

Who is Ceelo
Who is Ceelo

Yawn again people, Parasole is a business CORPORATION that has been around for two decades and makes $70 million a year off over a dozen restaurants. You will never be able to hurt it and it can do whatever it wants to. Best thing to do? Start your own restaurant holdings company.

 Greg
Greg

Can you say 'FAT-CAT' politics?  It spreads like a rash,

MNmoderate
MNmoderate

Wouldn't boycotting the Parasole restaurants just hurt the employees even more?

interesting
interesting

I do have to wonder why there is so much attention being drawn to Parasole when they are not even the 1st company in this market to do this. Has there not been enough investigating done or are those facts being intentionally ignored?

Honestly
Honestly

As folks have already pointed out, just because it's the legal thing doesn't make it the right thing. If we're talking alignment, this was lawful-evil.

Aaron
Aaron

Do all credit cards charge the same percentage to businesses? If not, wouldn't this complicate matters for the restaurant since they can't charge their servers more than the actual swipe fee?

Natalie
Natalie

Couldn't you subvert this by paying with a credit card but tipping in cash? Then Parasole would eat the 2% fee and your server would get all of his/her tip... Right?

ludwigtr
ludwigtr

technically you can't charge more for credit card transactions, but I don't know about the legality of taking it from employees.  It has to come from somewhere.  Just seems like a dick move, is all.  legal or not.

interesting
interesting

What change in the law are you proposing?

Greg V
Greg V

Wake up! They don't make $7.25 - they have an average of 12-15 tables per night averaging $5 each table - that's $60-$75 per the 4 hours they work - MINIMUM $15 per hour PLUS $7.25 = MINIMUM $22.50 per hour!

Greg V
Greg V

No, they don't get a discount - every worker at Parasole gets a FREE meal every time they work; if you don't believe it, call any Parasole restaurant, a host will answer the phone and ask them.

interesting
interesting

Yep, lol! Counter productive really. Everyone should just make it a point always tip with cash and save both the restaurants and servers from the credit card fees, no matter where you dine.

MNmoderate
MNmoderate

It's the typical knee jerk, "the little guy's getting screwed," reaction piece that the city pages is known for. They break the story fed to them by a pissed off employee and it makes major news. Great for readership and informative, but not always including the entire picture. Wonder how it'll impact Parasole advertising in the paper?

interesting
interesting

No they do not all charge the same, nor does say Visa charge all companies the same even. My guess is Parasole is still eating some of the cost for these transactions since it is a base 2% and I'm certain credit card companies are charging them more then 2%

interesting
interesting

This is sort of true, but you aren't understanding the entire concept. Restaurants pay a % of every credit card transaction to the credit card companies. So restaurants pay a % of the entire bill whether you tip with cash or credit card. Parasole is now making their servers pay only that % on the amount tipped, not the entire bill. So you wouldn't be sticking anyone with anything. You would be saving both the server and restaurant from having to pay the credit card companies for the tipped money

TeaBea
TeaBea

I'm not sure that that's true anymore--about not being able to charge more for credit card transactions. Wasn't that something that changed with Dodd-Frank and the whole swipe fee thing?

Either way, unless Parasole is paying their servers a living wage and offering them full benefits, they should keep their hands off the tips their servers earn, regardless of how those tips are transacted. They're lucky that the Cities don't make them pay toward the cost of providing health care for all the employees they likely leave uninsured; some cities do make their restaurants kick in for that. How unbelievably greedy.

catastrophe waitress
catastrophe waitress

Not true. Servers are pseduo-required to tip out 1/3 of their tips to the bartender/wait assistant. Then, they are taxed on the 7.25, and then taxed on their tips. The tips are recorded and the taxes are deducted from the 7.25. It depends on how much the server makes in tips, but the hourly usually comes to $3-5/hr. So the net would be something more like $50 in 4 hours or $12.50 per hour. Also take into account that there are definite slow times. So there are only a 20 lucrative hours a week that a server could make that much. If they worked more than that, the average would go down because they would be serving 1 or 2 tables per hour.

server
server

Not true. I used to work for them. They used to give us free leftovers, but no more.

Bill Crosby
Bill Crosby

They should leave their greedy hands off of their tips and just charge them for meals then.

interesting
interesting

I'd be pissed off at city pages and the employee that went to them with this if I worked for Parasole...not sure how a server benefits from getting people to boycott the company they work for, lol

interesting
interesting

*Correction* I'm certain there are certain credit companies charging more then 2%

Natalie
Natalie

But, in theory, the restaurant would still be paying the x% of the bill that the customer is putting on their card. Honestly though, while I object in principle, I'm sure if the restaurants weren't doing this they would just pay their staff less to compensate. 

Jesterlove17
Jesterlove17

what the hell is the difference, then?? Parasole's so evil....but they get free meals?? Well MY restaurant charges %2 credit cards AND only gives me %25 off meals! I must be working for satan!

You gotta pick and choose your battles. Instead of getting mad at Parasole, let's get mad about the reason this is happening- the economy sucks, banks and credit card companies are terrible. You can't blame small business when they're just trying to stay up.

Bill Crosby
Bill Crosby

I don't know why this thing won't let me reply directly to Interesting. Anyway, I understand they're making them pay the credit card fee. I was just trying to say that they could have attempted to hide what they're doing by getting the servers to start paying for their meals, and costing them more money than they're going to lose on 2% of credit card tips. They could cover those fees, and turn a profit off of the servers if they really wanted to. People keep calling them greedy, and maybe so, but it could be worse. I mean, yeah, it probably sucks to be a server, and have your boss say the company wants 2% of what you earned for yourself...then again, I'd hardly get bent out of shape over 2 cents of every dollar when I'm still getting way more money worth of food every time I work than I'm giving back to them on my tips... There's no such thing as a free lunch. And that's my two cents.

interesting
interesting

It is the credit card companies that are charging the fee, not the restaurant. They are simply not paying 100% of that fee on the tipped money anymore

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