Food Industry

Servers Call Foul on the System That Lets Restaurants Keep Service Charges

"I love waiting tables," Marco Gonzalez says as he tears into a meatball sub at Miami Shores' Pizza Point. The short 42-year-old with olive skin and large, piercing brown eyes wears his hair close-cropped after serving three years in the Marines.

In the decades since his discharge, luxury restaurants have given him a life he could have only dreamed of.

He owns a white stucco house crowned with a Spanish-tiled roof down the street from the exclusive Miami Country Day School. Over the past three years, Gonzalez has earned enough money waiting tables at pricey spots such as Prime One Twelve and Smith & Wollensky to take summers off.

"There's no other job where I could mingle with millionaires, taste what they eat, or drink the wine they drink," he says.

"We're the ones who make them money... And they're the ones who take it away."

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But in recent years, his earnings have shrunk. He blames the increasing prevalence of service charges that restaurants can tag onto diners' bills. As evidence, he hands over a document from the ritzy Nobu Miami Beach, where he worked for six months. It shows the restaurant was legally holding back nearly $7,000 worth of service charges that many diners probably thought would be paid to their waiter.

"The people who eat at Nobu don't give a shit about money," he says, "but I bet they'd care if they knew the house was taking that service money and not giving it to the waiters."

Gonzalez is among a growing group of servers across the nation who are fighting back against restaurants that use a loophole in federal law to shore up their bottom lines by placing an automatic service charge on checks. Rather than pass the money to waiters, the restaurants divert it to pay for everything from broken dishes to credit card processing fees and taxes.

The rule that allows this practice is buried deep in amendments to the Fair Labor Standards Act, a 1938 federal law that codified the 40-hour workweek, created a national minimum wage, and prohibited employment of minors. The seeds of the service charge loophole were planted in a set of 1966 changes that expanded the definition of commissions, which includes tips.

"Many restaurant patrons believe the service charge is just a gratuity and is transferred to the server; however, this is not necessarily the case because the service charge actually belongs to the restaurant, not the server,"says hospitality attorney Lowell Kuvin. "As a waiter, I'd say to a restaurant that wants to add a service charge, 'Fuck that — you're just stealing money from me.'"

Some places have billed this way for years. In Florida, restaurants and resorts are required to tell diners the house can keep the money, but can do so in tiny type anywhere on a menu. More progressive states such as Hawaii, New York, and Washington have passed laws making it illegal for operations to charge service fees without making it abundantly clear in large signage that money won't necessarily trickle down to rank-and-file employees.

Among the cases in which waiters and others have assailed the practice in recent years:

• In 2013, a federal judge in Hawaii awarded workers suing Four Seasons Ltd. $4 million after finding the company misled guests by discreetly charging service fees that never made it into servers' pockets.

• In 2014 in Bellevue, near Seattle, a branch of the family-style Italian chain Maggiano's Little Italy was forced to pay workers nearly $900,000 after tacking a 20 percent service charge onto its bills but failing to inform guests that not all of it would go to employees.

• And last year, workers sued Republican presidential candidate Donald Trump, his daughter Ivanka, and his son Donald Jr., claiming the Trump SoHo New York hotel charged customers a 22 percent service fee but never indicated it as such on menus, bills, or signage. The lawsuit is pending.

"There's no way any waiter who has a strong personality and is good at their job would want to work in a place that does this," Kuvin says. "It's like the place is stealing money from you."

Kuvin isn't shooting from the hip. Before becoming one of the city's preeminent restaurant attorneys, he spent 25 years managing and working in them. The apex of that career was more than a decade ago, when he spent six years as a server at Joe's Stone Crab.

"For a waiter to walk out of Joe's at the end of a night with only 18 percent in tips is a terrible night," Kuvin says. "I've seen tips there up to 200 percent."

Despite his aversion to the practice, Kuvin has helped restaurants up and down Miami Beach set up the service charge system. Today it's being used at Monty's, the Clevelander, Juvia, Seaspice, Lincoln Road's Maya Tapas & Grill, and others, he says.

Kuvin even successfully defended Maya against a lawsuit from server Saionara Leon, who didn't realize the service charges attached to the bottom of her tables' checks were never hers.

"My report would say I should have made $200 that night, but I only took home $80," says the 38-year-old, who sports a full mane of sandy-blond hair. Leon moved to Miami at the age of 14 from Colombia with her mother, sister, and barely a penny. A few years later, she attended Miami Dade College but dropped out after the first semester to earn money.

After working at a few clothing stores and gyms, she applied for a job waiting tables at an Italian restaurant in Hollywood. The mother of two was astonished by the amount of money she could make in a single night.

Then, in 2011, she thought she hit the lottery when she landed a gig at the bustling Lincoln Road restaurant Maya Tapas & Grill. But things soon went awry, she says. Managers told waiters 3 percent of the 18 percent service charge on their checks would be kept to cover the cost of broken plates and glasses. Another 2 percent was kept to cover the fees the restaurant pays to accept credit cards, and an additional 2 percent was redirected to the host.

Leon nevertheless held onto the job for two years, fearful of not being able to find another. "It's sad, but $100 or so a day works," she says.

In early 2014, however, she sued, claiming the restaurant violated federal minimum wage laws and broke an employment contract by failing to hand over her tips. By June, the suit was dismissed after Kuvin, who was representing Maya, presented documents showing that Leon earned as much as $25.37 per hour some days.

In the end, the court dismissed the case. Leon decided to just walk away, but she's still upset. "We're the ones who make them money; we're the ones who make them rich," Leon says. "And they're the ones who take it away."

For servers like Marco Gonzalez, the real problem is that most restaurant patrons don't understand what's happening. Like so many in the hospitality industry, he stumbled into it. He grew up in Cali, Colombia, moved to the United States after high school to join the Marines, and spent three years as a helicopter mechanic on a California base.

After leaving the service, he worked in restaurants and hotels in Los Angeles — including the iconic Beverly Hills Hotel — before picking up and moving to Miami in 2001. Soon he had lined up a job at the Palm. That was followed by Smith & Wollensky, Morton's the Steakhouse, Prime One Twelve, and Lure Fishbar.

In October 2015, he was hired as a waiter at Nobu, the famed Japanese-Peruvian restaurant in the Eden Roc that counts Robert De Niro as an investor. "I was there for five months and would sometimes earn as little as $150 a night," he says.

This past March, a lead waiter gave Gonzalez a document that showed the details of the 18 percent service charge. He kept it and provided a copy to New Times. It shows the take in service charges during the first week of March this year totaled $40,899.76. Of that, the restaurant kept $6,817.99. Waiters, bussers, and food runners split the rest.

A Nobu spokesperson confirmed the document's authenticity. The restaurant issued the following statement: "We comply with all federal and state laws regarding service and gratuity, and we make sure that our team members are aware of these practices."

Since Gonzalez left Nobu, finding a good-paying job waiting tables hasn't been easy. Several restaurants where he's applied all use the service charge system. Though his savings are dwindling, he refuses to work at a place he believes takes advantage of its staff.

"My advice to customers who don't want the restaurant to keep what should be a tip is to say you don't want to pay the service charge," he says. "You want to leave a gratuity that will actually make it to the waiter."

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Zachary Fagenson became the New Times Broward-Palm Beach restaurant critic in 2012 before taking up the post for Miami in 2014. He also works as a correspondent for Reuters.
Contact: Zachary Fagenson