Restaurants benefit from allowing patrons to open a tab. Aside from the potential for increased ordering, the process speeds up efficiency at the bar. The problem comes at the end of the night when credit cards are left unclaimed.
Returning credit cards is a hassle, and there is the hardship on wait staff who are denied their tips. What are the restaurant’s options to ensure that its employees get their tips?
Is it legal for a bar to charge a patron an automatic gratuity If the patron left their credit card overnight?
Legal Partner Christine Long: Yes, under certain circumstances. When paying for services, basic contract principles apply. We are all familiar with restaurants adding gratuity to a group bill of 6 or more. The same is true with a gratuity at the bar. A restaurant may automatically add a gratuity to a credit card left overnight at the bar if the restaurant’s policy is conspicuous, such as on drink menus, and displayed in a common area that patrons can see since oftentimes bar patrons don’t look at menus. It is also a best practice to display the policy on websites as well so if there is a dispute later on, the policy is clear.
How much may a restaurant charge in automatic gratuity from a patron’s credit card left overnight?
A reasonable amount. Clearly a 30% add-on gratuity would not be reasonable, but anywhere from 10 to 20% would be deemed reasonable and is in line with service charges that are added to large groups or parties. Under the Fair Credit Billing Act, credit card companies are required to reimburse unauthorized charges. If the bar does not have a sign stating its overnight gratuity policy, or the charge is exorbitant, the patron may have the charges returned from the credit card company.
May a bar charge an automatic gratuity on a credit card left overnight when the bar’s policy is not posted?
No. The restaurant’s policy related to overnight automatic gratuities must be conspicuous and displayed in a common area.
Are there any concerns when adding gratuity?
In California, automatic gratuities can be considered service charges, which belong to the Company. The Company should have a clear policy that states that all service charges or gratuities charged on left credit cards belong to the employees. The reason is because service charges that are shared with employees are treated like bonuses in California, meaning the employer must then weight the overtime, if any is worked, to include the service charge in the calculation.
This report was reviewed and updated in 2019 by Berliner Cohen. Berliner Cohen provides this information for general informational purposes only. The information is not, and should not be relied upon or regarded as, legal advice. No one should act or refrain from acting on the basis of such content or information, without first consulting with and engaging a qualified, licensed attorney, authorized to practice law in such person’s particular jurisdiction, concerning the particular facts and circumstances of the matter at issue.