The opinion
STATE OF MAINE SUPERIOR COURT
CIVIL ACTION
YORK, ss. DOCKET NO. CV-10-213
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ALLISON HAYDEN-TIDD,
on behalf of herself and all
others similarly situated,
Plaintiffs
v. DECISION
THE CLIFF HOUSE & MOTELS, INC.
and KATHRYN M. WEARE,
Defendants
Defendants The Cliff House & Motels (Cliff House) and Cliff House owner
Kathryn M. Weare have moved for summary judgment. Plaintiff Allison Hayden-Tidd
has also moved for summary judgment. There are no material disputed facts. The only
issue is the interpretation of the Maine Tip Credit Statute, 26 M.R.S. § 664(2), which
states in pertinent part:
"The tips received by a service employee become the property of
the employee and may not be shared with the employer .... Tips that are
automatically in the customer's bill or that are charged to a credit card
must be given to the service employee .... "
26 M.R.S. § 664(2) (2010).
Ms. Hayden-Tidd is a banquet server at Cliff House. All banquet purchasers at
Cliff House are charged a flat 19 percent service charge. Only the first 13 percent of the
19 percent is disbursed to servers like Ms. Hayden-Tidd. The remaining 6 percent goes
to other employees of Cliff House who work on the banquets in one way or another.
Included in the 6 percent group are nine different categories of workers from the
Director of Group Sales and Guest Services, who gets a commission on every banquet,
down to kitchen line workers, who get a much smaller percentage. (Pl.'s S.M.F. <_[ 8.) No
part of the 19 percent is distributed to ownership. (Def.'s S.M.F. <_[ 6.)
Ms. Hayden-Tidd's position is that under Maine's Tip Credit Statute, she and the
other banquet servers should get the entire 19 percent of the service charge. Cliff
House's position is that the service charge is not a tip as a matter of law and Cliff House
can disburse the 19 percent service charge as it deems appropriate.
Although this is a matter of first impression in Maine, other jurisdictions have
dealt with the issue. The United States Department of Labor has established that
banquet service charges are not tips. See 29 C.F.R. 531.52 (2011). Other states, such as
Massachusetts, expressly include service charges in its labor law as a fee in lieu of a tip
that must be paid completely to waitstaff employees. See Mass. Gen. Laws ch. 149,
§ 152A (2011). Hawaii does the same, but gives the employer the option to exempt
service charges if the employer clearly notifies the customer that the service charge is
being used to pay expenses other than wages and tips. See Haw. Rev. Stat. § 481B-14
(2011). New York requires service charges to be distributed to servers but only if the
employer purports the charge to be a gratuity for an employee. Samiento v. World Yacht,
Inc., 883 N.E. 2d 990 (N.Y. 2008).
The only clear theme in this controversy is that all jurisdictions that have
addressed the issue recognize that there is a difference between a tip and a banquet
service charge. The Code of Federal Regulations explains the difference as follows:
"A tip is a sum presented by a customer as a gift or gratuity in
recognition of some service performed for him. It is to be distinguished
from payment of a charge, if any, made for the service. Whether a tip is to
be given, and its amount, are matters determined solely by the customer,
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who has the right to determine who shall be the recipient of the
gratuity .... "
29 C.F.R. 531.52.
Under this definition, a tip is earned by a particular waiter or waitress. The tip
is paid by a particular customer for a particular service. A banquet server in contrast
does not discuss the menu with the customer, does not make recommendations, and
does not take orders. A banquet server does not develop a relationship with a
particular banquet customer. The banquet server simply serves food. The customer
does not tip the banquet server according to how well he is served. The purchaser of
the banquet pays the service charge regardless of the quality of service.
According to the undisputed deposition testimony of Ms. Weare, a banquet
server does not even get reimbursed for a particular banquet. (See Def.'s S.M.F. ~ 8.)
All of the banquet service charges for a pay period are thrown into a pool and the
banquet employees are paid according to the number of hours worked on banquets
during that period. (Id.)
Ms. Hayden-Tidd focuses on the phrase "automatically included" in the Maine
Tip Credit Statute and concludes that the plain meaning of the statute requires that the
service charge be disbursed exclusively to waitstaff. The problem with this approach is
that the statute refers to "tips" that are automatically included, not banquet service
charges that are automatically included.
The deposition testimony of Ms. Weare establishes that Cliff House has an
automatically included tip. Purchasers of Cliff House packages are told that a 15
percent charge will be included in the packages. (Pl.'s S.M.F. ~ 25, as qualified by Def.'s
Reply S.M.F. ']I 25.) In the case of a package, the waitperson attends a particular party.
(Id.) The party can either rely on the 15 percent automatic tip or pay more. (Id.) In any
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event, all of the charge goes to the waitperson who attended the party. (Id.) None of it
goes into the banquet server pool and none of it goes to management. (Id.)
In Maine- or at least at Cliff House- there are "automatically included" service
charges and there are "automatically included" tips. There are also tips that are not
automatically included. The tips - whether automatically included or not - go
exclusively to the waitstaff. The banquet service charges go to the pool and then,
according to a formula worked out by Cliff House, to all the employees who have
worked on the banquet.
One hesitates to assume what the legislature knew when it passed the Tip
Credit Statute and what it didn't know. Nevertheless, the distinction between banquet
service charges and tips has been longstanding. It seems unlikely that the legislature
did not know of the distinction.
The Maine Legislature did not include banquet service charges in its tip credit
act. The Legislature easily could have. The Legislature could easily amend the act to
say that tips include banquet service charges. The only reference in the current act is to
tips. A banquet service charge is not a tip, either by custom or in our labor law or in
other jurisdictions. A banquet service charge is treated as a tip only when the
Legislature requires that it be treated as a tip.
When a statute is ambiguous, it is appropriate to look to the administrative
agency that is charged with enforcing the statute. Cliff House has furnished the court
with a letter from an official at the Maine Department of Labor indicating that the
Department distinguishes service charges from tips and allows businesses such as Cliff
House to distribute service charges differently from tips or gratuities as long as the
customer knows a service charge is a service charge. (Def.'s S.M.F.<[12.)
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Because Cliff House failed to present the Department of Labor's interpretation
of the statute by affidavit or deposition, the letter from Wage and Hour Division
Director Anne Harriman cannot be assigned any weight.
At oral argument Cliff House, acknowledging that Ms. Harriman's letter might
be inadmissible, pointed to the 2007 legislative testimony of William Peabody as a
possible substitute for Ms. Harriman's letter. Mr. Peabody did testify in 2007 that the
Bureau wanted to make Maine law regarding tips consistent with federal law. But Mr.
Peabody did not address the issues in this case specifically. (See Def.'s Mot. Summ. J.,
Ex. 7.) Thus, although Mr. Peabody's testimony contradicted nothing in Ms.
Harriman's letter, it is not conclusive.
The precedent that at first blush seems to support Ms. Hayden-Tidd' s position is
Samiento v. World Yacht, Inc, 883 N.E. 2d 990 (N.Y. 2008). The Court of Appeals of New
York reversed two lower courts by holding that a mandatory banquet service charge
must be treated as a tip and distributed to the waitstaff if a reasonable patron would
understand that the service charge was being collected in lieu of a gratuity. Id. at 996.
Ms. Hayden-Tidd has requested that I accept this as a fall back position if I cannot read
Maine's tip credit statute to require that all banquet service charges always be
distributed exclusively to waitstaff.
Unfortunately for Ms. Hayden-Tidd, the New York Court of Appeals based its
decision on New York's tip credit statute, and New York's statute is different from
Maine's. See N.Y. Labor Law§ 196-d. New York's tip credit states that "No employer
... shall demand ... or retain any part of a gratuity or of any charge purporting to be a
gratuity for an employee." Id. The Samiento ruling turns on the phrase "any charge
purporting to be a gratuity for an employee." See 883 N.E. 2d at 994. The plaintiffs in
Samiento had alleged that 1) defendants told customers that the 20% service charge is
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remitted to waitstaff as the gratuity but in fact did not remit any part of the service
charge to waitstaff, and that 2) the ticket price included the gratuity, and that 3) an
automatic gratuity is added to the ticket price at the time of purchase. Id. at 992. The
New York Court ruled that if plaintiffs could prove those allegations, they could prove
that defendants were retaining a charge purporting to be a gratuity. Id. at 996. The fact
that the service charge was mandatory rather than voluntary did not get defendants off
the hook because defendants were telling customers that the service charge was a
gratuity. Id. at 994.
There are no allegations in this case that Cliff House told its customers that the
service charge was a gratuity. Even if there were such evidence it would do Ms.
Hayden-Tidd no good because the Maine tip credit statute lacks the "charge
purporting to be a gratuity" language contained in the New York statute. The New
York statute, on close reading, retains the distinction between a service charge and a
tip. However it requires that even a service charge must be turned over to the
employee if the employer has led a reasonable customer to believe the service charge is
a tip. It is not, of course, the province of the court to modify the tip credit statute. That
is the province of the Legislature.
It is also of interest that the Maine Legislature recently amended the tip statute
to remove any doubt as to the meaning of "tip." "Tip does not include a service charge
added to a customer's bill in a banquet or private club setting by agreement between
the customer and employer." P.L. 2011, ch. 118, § 2. The revised statute goes on to
specify that so long as the employer notifies the customer that the service charge is not
a tip, the employer can use the service charge to compensate all of its employees, not
just the service employees. Id. § 4.
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In other words the amendments affirm the practice of Cliff House but require
Cliff House to make sure that the customer is on notice that the service charge is not a
tip.
It is unclear from the legislative history whether the Legislature used the new
statutory provisions to clarify or modify the current meaning of the law. What is clear
is that the Legislature is reaffirming that a "tip" is not a "service charge."
Furthermore the Legislature has reaffirmed that a tip is a "sum presented by a
customer in recognition of services performed by one or more service employees,
including a charge automatically included in the customer's bill." Id. § 2. "A sum
presented by a customer in recognition of services ... " strongly suggests particular
service to a particular customer. That is what is important. Banquet servers do not
render particular services. Nor are they recognized in particular by the customers.
Absent a statutory command, banquet servers are not entitled to 100% of the banquet
service charge.
For all of the above stated reasons, the clerk will make the following entry by
reference.
Defendant Cliff House's motion for summary judgment is granted.
Plaintiff Hayden-Tidd' s motion for summary judgment is denied.
DATED: September ~ ~ 2011
William S. Biodrick, AR Justice
Maine Superior Court
ATTORNEYS FOR THE PLAINTIFF:
TIMOTHY BELCHER ATTORNEY FOR DEFENDANT:
SHANNON LISS-RIORDAN pro hac vice ROBERT KLINE
HILLARY SCHWAB pro vac vice KLINE LAW OFFICES
LIGHTEN & LISS-RIORDAN PC PO BOX 7859
100 CAMBRIDGE STREET 20th FLOOR PORTLAND ME 04112-7859
BOSTON MA 02114
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