A Win for Restaurants in Court

Minimum Wage

CRA’s advocacy extends beyond the Capitol building and city halls. We are very active in the courts, defending the rights of restaurants and challenging governments that exceed their authority.  That’s why it is so important to support our Legal Defense Fund which helps protect your rights to run your businesses without undue government interference.

On that note, CRA has secured a very favorable result in our federal court challenge to the City of Emeryville’s service charge law. 

Some background: many restaurant owners are offsetting minimum wage increases by adding mandatory service charges in lieu of menu price increases. Unlike tips, which are considered property of the tipped employees, compulsory service charges are considered revenue to, and property of, the business under both state and federal law.  By adding service charges, restaurant owners can disburse portions of the service charge to back of the house employees—who cannot collect tips—or to offset other increased costs. 

In 2015, Emeryville enacted an ordinance requiring restaurants to effectively treat service charges as tips by requiring that they be turned over in their entirety to the employees who provide direct service to the customer.  CRA challenged that ordinance on Constitutional grounds, arguing that restaurants had both recognized property rights to service charge revenue and free speech rights to communicate pricing to their customers however they chose. 

Following a very favorable argument in the US District Court on CRA’s motion to enjoin the ordinance from being enforced, Emeryville has tentatively agreed to rewrite its law.  Under the proposed new ordinance, restaurant owners will be able to maintain service charges so long as they sufficiently disclose to customers that the charge is not a tip for the service employees.  CRA’s Legal Center partners at the Weintraub law firm litigated the case – so a big thanks to Lukas Clary and Chuck Post at the firm.  

To learn more go to the Legal Center tab.