The 20 Percent Mandatory Service Charge in New York City for Large Parties

In last week’s New York Post article “Putting Bite on Eaters,” Amber Sutherland and Leonard Greene reported on the growing tension between restaurants and consumers regarding the practice of charging a mandatory 20 percent gratuity for parties of six or more.  The Department of Consumer Affairs reported that it has received 11 complaints about gratuities in the past year.  Despite such complaints, under New York City Consumer Protection Law (“CPL”), restaurants are allowed to add mandatory surcharges, under certain conditions, if these charges are printed on the menu. Rule 5-59 of the CPL provides that restaurants are prohibited from adding a surcharge to the cost of items listed on the menu, i.e., if they want to raise prices, they must change the individual prices on the menu, not just add a surcharge. However, bona-fide service charges for persons sharing one meal, a personal minimum amount, a required surcharge for groups of eight or more, are legal if they are printed on the menu, and take-out businesses are exempt. Columnist Steve Cuozzo, in the same issue of the Post, weighed in on whether mandatory tips for all restaurant patrons might be a good idea.  Cuozzo, in a piece entitled “Cork that Whine & Pay for Service,” states that 20 percent is the “appropriate tip in New York,” and that restaurants and customers could benefit from automatic service charges.  Additionally, Cuozzo also suggested that automatic service charges could reduce waiter lawsuits claiming that owners are stealing tips that are meant to be “pooled” as well as lead to a more respectful relationship between customers and waiters.