Can Service Charges Be Considered Gratuities?

December 19, 2019 | From HRCalifornia Extra

by Bianca N. Saad, J.D.; Employment Law Subject Matter Expert, CalChamber

A recent case demonstrates why it’s important for hospitality employers to clearly label and define their “service charges.”

In the case, a California Court of Appeal held that a mandatory service charge could be considered a “gratuity” that would need to be paid to service employees under Labor Code section 351 (O’Grady v. Merchant Exchange Productions, Inc., 41 Cal.App.5th 771 (October 31, 2019)) (O’Grady).

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