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SJC Permits No-Tipping Policy

The Massachusetts Supreme Judicial Court (SJC) recently held in Meshna v. Scrivanos, 471 Mass. 169 (2015), that Massachusetts law does not prohibit employers from adopting a no-tipping policy. The Court’s decision is helpful to employers whose workforce includes tipped employees as it provides important guidelines for lawfully implementing and managing such a policy.

In Meshna, a statewide group of Dunkin’ Donuts employees claimed that their employer violated the Massachusetts Tips Act, G.L. c. 149, § 152A, by, among other things, implementing a no-tipping policy that prohibited tipping and attempted to discourage customers from leaving tips. The Act is designed to protect the wages and tips of service worker employees, such as wait staff, counter staff and bartenders, by restricting employers from demanding, requesting, or accepting any payment or deduction from a tip or service charge given to those employees directly by a customer.

In 2003, Dunkin’ Donuts franchisee, Constantine Scrivanos, instituted a no tipping policy in his Massachusetts stores. To enforce the policy, Scrivanos directed his management company, NGP Management, LLC, to post signs at each store’s registers which stated “no-tipping” or “thank you for not tipping.” Scrivanos also instructed management to train store employees to advise customers of the no-tipping policy and to refuse tips when offered. In addition, store management communicated to employees that acceptance of tips could result in disciplinary action, up to and including, termination. If customers still left tips despite the policy then employees were required to place them in the stores’ cash registers.

In response to these practices, several employees filed a class action lawsuit alleging violation of the Massachusetts Tips Act. After the employees filed their lawsuit, Scrivanos changed the policy by instructing employees to place tips left by customers in an “abandoned change” cup near the cash registers. Employees were expected to notify customers that the abandoned change cups were not for tips, and that any money placed in the cups would be used toward future customers’ purchases much like the “take-a-penny, leave-a-penny” concept. Following this policy change, the employees amended their lawsuit to claim that this new directive on no-tipping also violated the law.

At the superior court level, it was determined that the Massachusetts Tips Act did not prohibit a no-tipping policy, however, the question remained as to whether the policy of placing tips in the stores’ cash registers or in an abandoned change cup violated the law. On appeal, the SJC affirmed the lower court’s decision by finding that the Act, while prohibiting employers from making deductions from tips given to employees, does not prohibit employers from instituting and maintaining a general no-tipping policy for their businesses.

The Court then addressed the question of whether employers with no-tipping policies violate the Act by keeping money left by customers who ignore the policy. The Court drew on common sense knowledge about the behavior of service and hospitality industry customers to reach its decision and determined that the answer would depend on whether an employer’s no-tipping policy is clearly communicated to its patrons. The court stated that “where the employer has clearly communicated to customers that a no-tipping policy is in effect, money left by customers in establishments where service is provided by wait staff is not a tip that was given to wait staff employees, regardless of a customer’s intent.”  Meshna, 471 Mass. at 177. However, if the policy is not “clearly communicated,” the money left by customers is considered to be a tip that belongs to the employees and may not be retained by the employer.Id. The Court reasoned that unless customers are aware of a no-tipping policy, they will leave tips and assume that employers will deliver the tips to their employees. On the other hand, if customers are provided with sufficient notice of an employer’s no-tipping policy and leave tips regardless of that policy, they can no longer assume the money will be “given to” the employees. Id. Methods by which an employer may “clearly communicate” a no-tipping policy include: (i) posting signs informing customers that employees may not accept tips; and (ii) instructing employees to inform customers orally of any no-tipping policy as well as adequately training employees on the content and timing of such communications. Id. at 178.

If you have any questions about this decision and how it may affect your business, please do not hesitate to contact our workplace litigation lawyers.