HOUSTON — The lack of transparency in where service charges in a customer’s bill actually go is leading to expensive legal troubles for hospitality operators.
The core issue in legal disputes over service charges is whether a reasonable customer understands what that mandatory fee actually means, said Amanda Monroe, partner and labor and employment practice group leader at Michelman Robinson, in a presentation at the Hospitality Law Conference.
“Did they believe a fee that’s maintained by the hotel or the restaurant is not going to employees, or do they understand it to be a gratuity or some combination of the two?” she asked.
There’s been a large focus on fee transparency in recent years, she said. New rules have gone into effect over junk fees and drip pricing, so all types of fees are now under the microscope.
"What's important now is looking at the increased scrutiny on these service charges," she said. "Whether it's from a very active plaintiff's bar, like we have in California and other states, or whether it's legislative scrutiny, there's a large focus on transparency."
It’s necessary to know whether any portion of a service charge is gratuity because of laws that prohibit an employer from taking any of those funds, diverting those funds or holding on to them because they are considered wages of the employees, she said. Violating those laws can lead to wage and hour class action claims.
It may also cause confusion on the side of the customer who may misunderstand...
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