Death by a Thousand Service Fees

If you’re the type of diner who regularly eats at restaurants, you’ve almost assuredly noticed a “service fee” tacked on to your check at one establishment or another. These fees, which can range from 3 percent to 20 percent of your total bill, are increasingly ubiquitous as the cost of doing business gets more expensive for restaurants. They’re also endlessly complicated, both for the diners who pay them and the employees who allegedly benefit from them. Now, the fees have inspired a lawsuit at Los Angeles hot spot Jon & Vinny’s.

To make the case for service fees, many restaurateurs have insisted that they’re a way to make pay more equitable between front-of-house workers like hosts and servers and kitchen workers like line cooks and dishwashers. Many of the restaurateurs that started charging service fees did it as a way to phase out the notoriously inequitable system of tipping altogether — or because their attempts to get rid of tipping via raising menu prices failed. And many, including industry heavyweights like Danny Meyer’s Union Square Hospitality Group, couldn’t make the no-tipping model work due to staff departures over lower front-of-house pay, customer sticker shock, or both. The service charge, as Benu’s Corey Lee put it a few years ago, is a bridge: “The idea of a ‘tip’ is so ingrained in American dining culture that most diners aren’t ready for service-inclusive pricing,” Lee said back in 2019. “Therefore, we break it out for them as a separate charge so they can see what’s happening.”

But many restaurant employees say that these service charges do more to benefit restaurant owners than actually improve pay equity in these establishments. In June, a group of servers at popular Los Angeles Italian restaurant Jon & Vinny’s filed a class-action lawsuit, alleging that they weren’t actually benefiting from the restaurant’s 18 percent service charge. The lawsuit also claims that the charge is confusing for customers, many of whom believe that the service fee is there in lieu of a traditional tip. In response to the suit, the owners of Jon & Vinny’s denied the servers’ claims, and told the Los Angeles Times that “customers are offered information that states the fee is not a tip.”

A November 2022 receipt from Jon & Vinny’s, reviewed by Eater, is printed with a lengthy disclaimer that the 18 percent service fee it charges is not a tip, and “enables the restaurant to provide equitable wages to all of our employees.” (The LA Times quoted a line cook who said that the fee resulted in his earning above minimum wage.) Shortly after the lawsuit was filed, Jon & Vinny’s updated the disclosure on their receipts, and servers say the new wording has made little difference to diners. And while the goal of pay equity, as explained on the receipt, is noble, it’s probably a stretch to assume that customers, gorged on pasta and natural wine, are spending significant amounts of time reading the fine print at the bottom of their receipt; the servers say that diners are tipping less or not tipping anything. But that’s the fundamental issue with both tipping and service fees: Restaurants are one of the only industries in which customers are responsible for ensuring that all workers in an establishment are paid a fair wage at all.

Whether or not you actually buy the servers’ argument in the lawsuit, one thing is abundantly clear: Service fees are really confusing to customers. It’s not unreasonable for diners to believe that something called a “service fee” would be compensation for the person who is preparing their food, serving them and cleaning up after them, even if that’s not always the case. And considering how many people are just terrible tippers in general, it’s perhaps not surprising that some of them are balking at the idea of paying an additional 15 or 20 percent to the server on top of that 18 percent that, whoops!, might be going to the restaurant’s owners.

What’s worse is that many states don’t regulate restaurant service fees, which means that how that money is spent is often left entirely up to restaurant owners. In all but a few states, they’re not obligated to use service fee revenue to pay better wages to anyone at the restaurant, servers or kitchen staff. In fact, it’s been reported that some restaurants have used the fees as a way to pad their revenues, or offset fees charged by credit card processing companies, while others have legitimately used the money to pay for benefits like health insurance (some restaurants even list out a separate healthcare surcharge).

More equitable pay in the restaurant industry is obviously desirable, but it doesn’t seem like unregulated, opaque service fees have much of a proven track record when it comes to achieving that goal. In fact, service fees can be a mere cash grab, an extension of our broader culture, which is littered with junk fees. We’ve already accepted so many fees and terms and conditions in every other aspect of our lives, what’s one more?

It’s true that restaurant owners are currently in an unwinnable scenario. Costs keep going up, and customers will not tolerate price increases at the same rate. But one reason that it is so challenging to raise prices is that they’ve been artificially low for so long. At some point, restaurants are going to have to come clean to their customers about what the food we buy at them really costs. Fees — imperfect and confusing at best, cynical marketing trickery at worst — aren’t exactly a great way to build customer loyalty. It’s also hard to make people really understand how thin the margins are in the restaurant industry when they’re constantly being fudged to make prices seem more palatable to customers.

Any change to the industry’s tipping structure has to be a matter of collective action. On its own, just one restaurant’s — even one powerful restaurant group’s — plan to dramatically hike prices and offer its own pay scales is doomed to fail. There has to be some kind of regulatory solution: At the extremely unlikely end, restaurants in the U.S. could abolish tipping entirely, allowing restaurants to set pay scales that attract and retain talent in the same way other businesses do, earning profit by selling their dishes at an appropriate markup. More likely, we could pass legislation that creates a legal obligation for restaurants to be transparent with both customers and workers about the fees that they charge, or even govern what additional fees are permissible at all (maybe the law allows for fees to be used towards pay equity, but not credit card fees, for example). Some local governments have tried to create these structures, but the results have been uneven. As Recode notes, in New York, all service fees must be directed to waitstaff, while Florida restaurateurs are allowed to spend service fees charged to customers as they see fit.

However they’re charged, what we can be sure about is that service fees aren’t going away, and they’re probably not top-of-mind for most legislators at the moment. But any restaurants already implementing these additional charges could at least be more honest about what that money is going toward. If the fee is the result of inflation, call it an “inflation fee.” If management is using the money to establish pay equity between front-of-house and back-of-house workers, call it a “pay equity fee,” and explain to your customers what that means in a way that’s much more comprehensive than a couple of words on the bottom of a receipt.

The end result — a higher total bill — is the same, it’s just that those extra dollars are a little easier to stomach when you understand why you’re being asked to pay more. Any decent human being who loves restaurants should want the people who cook their dinner, wash their dishes, and serve their plates to be paid a fair wage. Until diners are ready to adjust to a world in which a bowl of pasta is bluntly listed at $25 on menus at even neighborhood restaurants, we’ll just need to keep finding ways to ease the pain of death by a thousand fees.