A.G. Schneiderman Announces $500k Settlement With Per Se Restaurant For Keeping Tips

Per Se Must Pay $500,000 In Restitution To Workers

Schneiderman: Companies Must Not Underpay Employees And Mislead Consumers By Retaining Gratuities Intended For Staff

NEW YORK – Attorney General Eric T. Schneiderman announced that his office has reached a settlement with Per Se, a Manhattan fine-dining establishment, for failing to pay its waitstaff a 20% surcharge designated as a “service charge” in its contracts with customers for private dining and banquet services from January 2011 through September 2012.

The Attorney General’s investigation revealed that during this period, Per Se charged its private dining customers an additional 20% for service and listed the 20% service charge on its receipts and printed materials.  In addition, Per Se also informed certain customers who inquired that the 20% charge was equivalent to a gratuity.  For example, in response to one email inquiry, Per Se replied, “[K]indly note that service/gratuity is certainly included in the pricing.”

Instead of directing it to the workers, Per Se used the service charges for its restaurant operations. The law requires Per Se to distribute the charges as gratuities to its employees, and this requirement applies even for employees paid above the minimum wage.

“Today’s agreement will compensate workers at Per Se who were shortchanged out of their hard-earned tips,” said Attorney General Schneiderman, “And it reaffirms the right of satisfied restaurant-goers not to be misled about whether a ‘service charge’ is actually paid to workers as a tip, which the law requires.” 

Per Se, which the New York Times once called the “best restaurant in New York City”, was first opened by Thomas Keller in 2004. As of July 1, its standard “tasting menu” charges a fixed price of $310 per person.

New York Labor Law prohibits an employer or his agent from accepting or retaining any portion of an employee’s gratuity or a charge “purported to be a gratuity.”  In 2008, the New York Court of Appeals held that if the reasonable customer would believe that a charge was a gratuity, it had to be turned over to the employees.  And since 2011, New York regulations have contained very specific rules for employers about “service charges,” including the requirement that employers must notify their customers when a service charge is not a tip or gratuity by using specific language and 12-point font.

A copy of the agreement can be found here.

The case was handled by Assistant Attorney General Claudia Henriquez of the Labor Bureau. Terri Gerstein is the Labor Bureau Chief, and Alvin Bragg is the Executive Deputy Attorney General for Social Justice.

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