Massachusetts: All Invoice “Service Charges” Must be Paid to Employees

Applies to:          All Employers with Tipped MA Employees

Effective:             August 23, 2021

In Hovagimian v. Concert Blue Hill, LLC, the Massachusetts Supreme Judicial Court stated that the Massachusetts Tips Act requires employers to pay service employees for any “service charge” listed on a customer invoice, even if the service charge is intended as an administrative fee. The Tips Act specifically refers to a “service charge or tip” that must be paid to service employees. Employers are permitted to charge customers with administrative fees but must label the charge as such to avoid confusion with a tip or service charge intended for service employees.

There, a banquet services contract specifically identified a gratuity charge and an overhead charge that was not provided to service employees. However, the customer invoice labeled the overhead charge as a “service” charge. Regardless of what the parties’ intent was as identified in the contract, the Tips Act specifically governs invoices, and the invoice there was not compliant. The court construed the employer’s “carelessness” against it, even though it meant an unintended windfall for employees. This case should be a clear warning to service providers to ensure invoices accurately identify charges.

Action Items

1. Review customer invoice format for compliance with labelling requirements.
2. Have appropriate personnel trained on the current requirements.