If you're a company and you add a mandatory "service charge" to the bill, does that constitute a "gratuity" (i.e., tip) that has to be shared only with the relevant service people?
The Court of Appeal says: "Maybe."
When I first thought about it, that answer didn't seem particularly compelling. But the more I thought about it, the more it seems to me that the Court of Appeal's answer is correct.
I could imagine lots of "service charges" that fairly clearly aren't gratuities (at least to me). Even if they're invoked in the traditional food and beverage industries. For example, say a business added a $3.00 "service charge" for room service, and had a separate category on the bill for a tip. To me, that charge is fairly clearly not a gratuity.
By contrast, imagine that the hotel adds an 18% "service charge" on to room service bills, and does not include a line for tips. Well, to me, I'd almost certainly think that's going to the server. That's a gratuity to me.
I can imagine a million different types of variations. Here, it's a 21% service charge imposed by a banquet facility. Well, it's close to 15 and 18 percent, which is the typical "tip" amount. But it's not exact. And it's on banquet stuff, which is not a totally mainstream tipping area. So I could see someone going either way.
Which is what the Court of Appeal is basically saying. It depends on the fact. There's no categorical rule. Sometimes "service charges" are tips. Sometimes they're not. Depends on a ton of things.
Not a bright-line rule, so it'll have some transaction costs and uncertainty. But still the right rule.
