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Legal Advice: Service Fees

We asked an attorney about penalties for not properly distributing your service fee.

Q: What are the consequences if a restaurant charges a service fee but doesn’t distribute it to staff correctly?”

A: “A service charge is income to the restaurant and you can do with it as you like. It’s not like a tip pool, and that’s why so many restaurants are considering moving away from the traditional tip model to a service charge they list on the check. However, you’re far better off being transparent [about how a service charge is distributed]. You’re less likely to piss off your patrons, and in terms of a happy workforce, you don’t want any gamesmanship.” —Todd Fredrickson, employment attorney, Fisher Phillips, Denver

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