100 | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP By explicitly tying the definitions of tips and service charges to the individuals for whom they are intended, the Tip Statute exempts from its scope any money that patrons explicitly leave for or give directly to employees who are not wait staff employees, service employees, or service bartenders.577 As a result of the statute’s amended language, courts determining whether a mandatory charge is a service charge not only consider what a fee is called, but also whether a customer would reasonably expect that the fee is charged in lieu of or in addition to a tip or gratuity for employees covered by the statute.578 In Hovagimian v. Concert Blue Hill, LLC,579 the SJC addressed both issues. In that case, the employer’s event contracts stated that patrons would be charged a 10% administrative fee for banquet services. However, the event invoices provided to patrons referred to the fee as a service charge. The trial court dismissed plaintiffs’ claims that the failure to remit the 10% fee violated the Tip Statute, and the Appeals Court affirmed. The SJC reversed, holding that the disputed charges were service charges under the Tip Statute. Although the event contracts informed patrons that the charge was an administrative fee, the SJC explained that the invoices referred to the fee as a “service charge” and that language settled patrons’ expectations as to whether any portion of the fee would be going to the employees or whether they should be tipped separately.580 the service employees in question. DiFiore v. Am. Airlines, Inc., 454 Mass. 486, 497 (2009) (“[A] ‘service charge’ need not be charged by an employer, but may be imposed by any person or entity.”). See Section VI.F, infra. 577 While the Tip Statute treats service charges like tips in requiring their distribution to certain types of employees, service charges are not tips under the FLSA. See 29 U.S.C. § 203 et seq.; 29 C.F.R. § 531.50 et seq. (“A compulsory charge for service, such as 15 percent of the amount of the bill, imposed on a customer by an employer’s establishment, is not a tip …); Compere v. Nusret Miami, LLC, 28 F.4th 1180, 1186-7 (11th Cir. 2022) (holding that service charge is not a tip under FLSA because Department of Labor regulations indicate the critical feature of a tip is that the choice to give it and the amount to give are “determined solely by the customer”, and a mandatory service charge set by the employer is clearly outside that definition). In the past, unlike the Massachusetts Tip Statute, there had been ambiguity as to whether the FLSA applied to tips if an employer had not taken the tip credit, as described in Section VI.E, infra. See, e.g., Cumbie v. Wendy Woo, Inc., 596 F.3d 577 (9th Cir. 2010) (holding FLSA did not apply to tips where employer had not elected to take the tip credit). However, in March 2018, Congress amended the FLSA to make clear that employers may not retain tips received by its employees for any purpose, regardless of whether the employer takes a tip credit. 29 U.S.C. § 203(m)(2)(B) (“An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.”). Moreover, Congress further amended 29 U.S.C. § 216(b) to create a separate cause of action for the recovery of unpaid or improperly withheld tips. See 29 U.S.C. § 216(b) (“Any employer who violates section 203(m)(2)(B) of this title shall be liable to the employee or employees affected in the amount of the sum of any tip credit taken by the employer and all such tips unlawfully kept by the employer, and in an additional equal amount as liquidated damages.”). 578 M.G.L. ch. 149, § 152A(a). In Mouiny v. Commonwealth Flats Development Corp., the court held that station fees were not service charges because customers could not reasonably expect these fees to be given to wait staff. Mouiny, No. SUCV20061115-BLS1, 2008 WL 9028521, *7 (Mass. Super. Aug. 18, 2008) (“It is doubtful that any reasonable patron would expect that a ‘station fee’ would be paid directly to the wait staff . . . .”). The court concluded that the pre-2004 version of the statute simply did not apply to a fee that was not called a service charge, but also held that “as a matter of law, under both versions of the [Tip Statute], these station fees were not gratuities and were not required to be distributed among the servers.” Id. at *6. In Hernandez v. Hyatt Corp., the court found that “no reasonable patron would expect that the [station fee] . . . would be remitted to the wait staff in lieu of or in addition to a tip.” Hernandez, No. SUCV2005-0569-BLS1, at 7 (Mass. Super. May 4, 2009). 579 488 Mass. 237 (2021). 580 Id. at 244-45. In Norrell v. Spring Valley Country Club, Inc., 98 Mass. App. Ct. 57, 67 (2020), the Appeals Court held that where an invoice labeled a fee as a “house charge,” the use of the term “service charge” in promotional materials did not impose per se liability under the Tip Statue. The SJC in Hovagimian cited to Norrell and suggested that the use of the phrase “service charge” on the patron invoices was the dispositive fact in that case.
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