Employees argued that a service charge at the Nurs-Et Miami should not have covered their wages. A court disagreed.
Advertisement

If Salt Bae has taught us one thing, it's how to sprinkle salt on steak in dramatic fashion. If Salt Bae has taught us two things, it's how to charge exorbitant prices for what's widely described as average food. But if Salt Bae has taught us three things, this might actually be the most important one: a service charge is not necessarily a tip. And if you're paying a service charge, that fee can be used as part of an employee's wages and does not entirely have to be given to staff on top of their normal pay.

This lesson comes courtesy of the United States Court of Appeals for the 11th Circuit which on Friday upheld the decision of a Miami federal judge who ruled that an 18% "service charge" added to bills at the Nurs-Et Steakhouse in Miami – which is owned by Nusret Gokce, a.k.a. Salt Bae – was not a tip because it was not at the sole discretion of the customer. (For the record, yes, the phrase "Salt Bae" does appear in the ruling, once.)

As the ruling states, "If the mandatory service charges are tips, federal law would generally prohibit restaurants from using the fees to pay minimum and overtime wages to employees. But if the charges are not tips, establishments may apply them toward employee wages." 

Two dozen Nurs-Et employees sued the establishment, arguing that this service charge shouldn't have been used to cover their normal wages, but ultimately, the court ruled in favor of the restaurant. It's a decision that Reuters points out is in line with a 2020 4th Circuit decision that determined that an automatic 20% gratuity for large parties is also not officially a tip.

Turkish restaurateur Nusret Gokce, also known as "Salt Bae," poses for photos at his restaurant Nusr-Et
Credit: Ozan Kose / AFP via Getty Images

Interestingly, the language used by Nurs-Et does sound similar to what a customer might believe a "tip" to be. "For your convenience an 18% service charge will be added to your final bill and will be distributed to the entire team," the menu is quoted as reading in the ruling.

However, in its decision, the court cites a precedent which stated that "the essential element of a tip is its voluntary nature." And the court later adds, "The FLSA [Fair Labor Standards Act] defines neither 'tip' nor 'service charge.' But as noted in Department of Labor  ("DOL") regulations, the critical feature of a 'tip' is that '[w]hether a tip is to be given, and its amount, are matters determined solely by the customer.'"

The court also cites another DOL regulation providing an example of what is not a tip: "A compulsory charge for service, such as 15% of the amount of the bill, imposed on a customer by an employer's establishment, is not a tip." The court then continues,  "We simply cannot distinguish between Nusret's service charge and this example."

Worth noting is that, during the period covering the Nurs-Et employees' complaint – November 1, 2017 through January 1, 2019 – staff was found to have made amounts ranging from $23.68 to $51.58 per hour. So everyone involved was making well over minimum wage.

Still, a larger moral exists beyond a bill at Nurs-Et: Be mindful of any additional charges or fees that are not entirely at your discretion. And if you're unsure how a service charge is being used, it might behoove you to clarify it with your server.