Requires notice from employers to customers of service charges and administrative fees that are not distributed to employees as gratuities

BILL NUMBER:S3109A

Title of bill

An act to amend the labor law, in relation to requiring notice from employers to customers of service charges and administration fees that are not distributed to employees as gratuities

Purpose of bill

To codify the past practices of catering hall facilities based on Department of Labor regulations for the imposition of service charges prior to the Court of Appeals decision in Samineto v. World Yacht, Inc,

Summary of specific provisions

Amends section 196-d of the labor law, as added by chapter 1007 of the laws of 1968 creating a new subsection 1 to allow for employers to add a mandatory gratuity so long as the charge is conspicuously disclosed and the full amount of the gratuity is distributed to the employees. Additionally amends the current labor law section 196-d to explicitly state that written notice shall be given to customers that mandatory service charges or any similar administrative fee, are not part of a gratuity if that charge, or only part of that charge is not to be distributed to any employees as a gratuity. The statement shall be written in ordinary language in no smaller than 12 point font on the agreement or contract and in a type size similar to the surrounding text on the check or invoice. Subsection 3 sets forth the requirements for an affirmative defense for an action stemming from events held prior to January 1, 2011 (the effective date of the Department of Labor regulation setting disclosure requirements).

Section two sets the enacting date.

Justification

The Court of Appeals held in Samineto v. World Yacht, Inc., 10 N.Y. 3d 70 (2008) that mandatory service charges may be a charge that is purported to be a gratuity if the reasonable customer would understand such a mandatory charge to be a gratuity. Prior to this decision, owners of catering halls reasonably relied on a 1995 state-wide memorandum of the New York State Department of Labor (consistent with federal law) and numerous subsequent Department Opinion Letters, which confirmed that in the cases of banquets or other special functions, a service charge would not be considered a gratuity. The Samiento decision radically altered this paradigm and subjected catering halls to significant retroactive liability, despite their practice having been consistent with the regulations at the time and in compliance with Department guidance and the holdings of lower state and federal courts.

Prior legislative history

S.62995 (2012)Passed Senate; S.7791 (2012)

Fiscal implications

None to the state.

Effective date

This act shall take effect immediately.