§481B-14 Hotel or restaurant service charge; hotel porterage service charge; disposition. (a) Any:

(1) Hotel or restaurant that applies a service charge for the sale of food or beverage services; or

(2) Hotel that applies a service charge for porterage services;

shall distribute the service charge directly to its employees as tip income or clearly disclose to the purchaser of the services that the service charge is being used to pay for costs or expenses other than wages and tips of employees.

(b) As used in this section, unless the context requires otherwise, "porterage" means the act of moving luggage, bags, or parcels between a guest room and a lobby, front desk, or any area with vehicular access at a hotel, hotel-condominium, or condominium-hotel, as defined in section 486K-1. L 2000, c 16, §2; am L 2015, c 137, §2

Case Notes

This section is not preempted by the federal Fair Labor Standards Act regulations; further, this section is not unconstitutionally vague in violation of due process; moreover, this section did not deny defendant hotel and resort employer due process because it did not automatically transform the service charges in question into the property of plaintiff hotel employees, who sought unpaid wages, because it permitted defendant the option of disclosing to customers that the service charges would not be paid to employees. 810 F. Supp. 2d 1145 (2011).

This section requires hotels and restaurants to pay service charges to employees as tip income if they do not disclose their contrary practice to customers; to the extent that the legislative history of this section is relevant to the question of whether employees may sue for unpaid wages under §388-6 based on violations of this section, that legislative history, as interpreted by the Hawaii supreme court, provides support for the idea that employees may do so. 810 F. Supp. 2d 1145 (2011).

Defendant resort's motion to dismiss plaintiff resort employees' claim that defendant violated this section, brought under §480-2(a), granted where plaintiffs' allegations did not show the nature of the competition or demonstrate that plaintiffs have suffered an antitrust injury; Hawaii's requirement that a plaintiff assert the nature of the competition was designed to serve the same purpose as the federal requirement that a plaintiff assert an antitrust injury. 818 F. Supp. 2d 1240 (2010).

Plaintiff resort employees' claim, brought under §480-2(a), that defendant resort violated this section was not preempted by §301 of the Labor Management Relations Act, 29 U.S.C. §185(a), because the claim regarding this section was a statutory claim that was independent from any obligations created under the collective bargaining agreement (agreement) between defendant and plaintiffs; further, resolution of the claim did not require interpretation of the agreement and there was no clear and explicit waiver of plaintiffs' rights under this section in the agreement. 818 F. Supp. 2d 1240 (2010).

Plaintiff resort employees' claim that defendant resort violated this section was not preempted by the National Labor Relations Act pursuant to the Machinists doctrine because it is not the type of statute that the Machinists doctrine was intended to preempt as it does not present the types of concerns enunciated by the United States Supreme Court in Machinists; further, this section had no comparable effect on the bargaining process; moreover, this section provides a minimum protection for employees as well as consumer protection. 818 F. Supp. 2d 1240 (2010).

Plaintiff hotel employees' claim, brought pursuant to §§480-2 and 481B-4 and this section, was not preempted by §301 of the Labor Management Relations Act, 29 U.S.C. §185(a) because plaintiffs were not enforcing a right conferred only by the collective bargaining agreement (agreement), but rather an independent right conferred by state law; resolution of plaintiffs' state law claim was not dependent on any provision contained in the agreement and did not require interpretation of the agreement. 835 F. Supp. 2d 914 (2011).

Plaintiffs' claim pursuant to §§481B-4 and 480-2 and this section dismissed because: (1) they had not alleged harm to competition; (2) merely alleging competition between hotels that result in lower prices did not give rise to antitrust injury; (3) no authority to support plaintiffs "competing" with defendant for tips, that there was a competitive market that defendant was a part of for tips, or that defendant's actions regarding service charges had a negative effect on that market; and (4) statements that their injuries were "inextricably intertwined" with defendant's acts did not establish that defendant caused any negative effect on competition. 835 F. Supp. 2d 914 (2011).

The legislative history of this section, as interpreted by the Hawaii supreme court in Davis, allows plaintiff hotel employees to recover for unpaid service charges imposed without the requisite disclosure set forth in this section, through a claim brought pursuant to §§388-6, 388-10, and 388-11. 835 F. Supp. 2d 914 (2011).

This section was a law of general applicability which creates a minimum standard related to service charges for the entire hotel and restaurant industry; consequently, this section did not encourage or discourage employees in the promotion of their interest collectively, and was not the type of statute that the U.S. Supreme Court in Machinists ("Machinists doctrine") intended to preempt. 835 F. Supp. 2d 914 (2011).

Employees are "any persons" within the meaning of §§480-1 and 480-2(e) and are within the category of plaintiffs who have standing to bring a claim under §480-2(e) for a violation of this section; however, based on the allegations contained in employees' amended complaint, employees did not sufficiently allege the "nature of the competition" to bring a claim for damages against employer under §§480-2(e) and 480-13(a) for a violation of this section. 122 H. 423, 228 P.3d 303 (2010).

When a hotel or restaurant applying a service charge for the sale of food or beverage services allegedly violates this section by: (1) not distributing the full service charge directly to its employees as "tip income" (in other words, as "wages and tips of employees"); and (2) failing to disclose this practice to the purchaser of the services, the employees may bring an action under §§388-6, 388-10, and 388-11 to enforce the employees' rights and seek remedies. 130 H. 130, 306 P.3d 175 (2013).

Where employers imposed a service charge at banquets and other functions held at employers' hotels, and retained a portion of the service charge income without disclosing that practice to customers, service employees were entitled to an award of double damages under §388-10. 133 H. 1, 323 P.3d 792 (2014).

Where employers imposed a service charge at banquets and other functions held at employers' hotels, and retained a portion of the service charge income without disclosing that practice to customers, the circuit court correctly held that "tip income" retained by employers in violation of this section constitutes "compensation" earned by service employees for purposes of bringing a claim under §§388-6, 388-10, and 388-11. 133 H. 1, 323 P.3d 792 (2014).

Where employers imposed a service charge at banquets and other functions held at employers' hotels without disclosing their retention of a portion of the service charge to customers, employers were required to distribute one hundred per cent of service charge income to non-management service employees who provided the services for which customers believed they were tipping. 133 H. 1, 323 P.3d 792 (2014).

Where hotel collected nineteen per cent service charge for patron's wedding reception and retained fifteen per cent of the service charge to pay employees' wages, the intermediate court of appeals erred in holding that no disclosure to patron was required. A hotel or restaurant that applies a service charge for food or beverage services must either distribute the service charge directly as tip income to the non-management employees who provided the food or beverage services or disclose to its customers that the service charges are not being distributed as tip income. 134 H. 352, 341 P.3d 558 (2014).