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Federal judge allows lawsuit against Applebee’s mandatory tipping

Former customers at a string of New York City-based Applebee’s restaurants are suing over a forced tipping system, which the plaintiffs argue should be voluntary. At the restaurants in question, customers pay using an at-table, digital payment system, which forces customers to pay a minimum tip of 15–18 percent (based on the restaurant)—with neither an opt-out option nor an opportunity to designate a smaller amount.

While the restaurant menus indicate that prices do not take taxes and gratuity into account, the plaintiffs claim the restaurant did not properly disclose the tipping system. They are suing for false advertising, unfair business practices, negligent misrepresentation, breach of contract and unjust enrichment.

Applebee’s, using five defenses to refute the plaintiffs’ allegations, petitioned the court to have the lawsuit dismissed. Last week federal judge J. Paul Oetken ruled to permit the class action lawsuit to proceed, discrediting Applebee’s claims:

  • Claim #1: The menu properly displayed the tipping structure. Oetken asserted that notifying customers that prices do not include taxes and gratuity is not the same as defining the tipping structure.
  • Claim #2: The plaintiffs were not really required to tip, as they could have asked the wait staff for a paper bill to circumvent the automated tipping structure. Oetken held that it is not reasonable to assume that customers would know about his option.
  • Claim #3: Tipping is a widely accepted social norm. According to Oetken, this social norm permits customers to tip less than normal in the event of poor service, and Applebee’s failed to provide this option.
  • Claim #4: None of the plaintiffs alleged injury. The judge claimed that customers who would not have otherwise tipped the standard 15–18 percent could have been harmed by being forced to pay it.
  • Claim #5: Because tips went to the wait staff—not the restaurant—there are no grounds for unjust enrichment. Oetken held that even if all tips went to wait staff, this could have positively impacted the restaurant, because increased income generation through tips could lead Applebee’s to pay their staff less.

Should it be legal for a restaurant to implement a requisite, minimum tipping system? What do you think?

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