This class action lawsuit claims that two Applebee’s locations in New York City illegally charge surcharges for food from the restaurant instead of allowing customers to choose how much they wish to tip.
In addition to paying the purchase price for goods, American consumers are accustomed to tipping restaurant staff for good service by voluntarily paying them a percentage of their total bill as a gratuity or “tip,” with 99% of American consumers reporting that they typically give tips when dining at full-service restaurants. Different people choose to tip different amounts, with 42% typically giving 15% or less, 44% typically giving 16-20%, and 13% typically giving more than 21%. Tax law recognizes that tipping is optional and that consumers tip different amounts. The IRS generally requires large restaurants to pay employment taxes on the assumption that customers tipped at least 8% of their total bill on average per year.
Despite this culture of voluntary tipping, these Applebee’s locations require customers to pay an unadvertised mandatory surcharge in addition to the listed price of food and drink. This surcharge is hidden from consumers until after they have already eaten and are paying their bill at tabletop point-of-sale terminals. Consumers at the Times Square location who attempt to pay a gratuity of less than 18% by credit card are not allowed to do so. Consumers at the Broadway location who attempt to pay a gratuity of less than 15% by credit card are not allowed to do so.
One plaintiff in this lawsuit, Kendall Ghee, is a resident of Kings County, New York. On October 19, 2016, Ghee purchased food at the Applebee's Neighborhood Grill and Bar at 234 W 42nd St. The total bill before taxes was approximately $17.38. Before paying, Ghee was asked to select a tip amount of Applebee’s tabletop credit card reader. The device had a default tip amount of 18%. He was happy with his service, so he paid the 18%, but he would not have paid it had he known it was truly a surcharge. On November 8, 2016, Ghee purchased food at the Times Square location. He was not satisfied with the food and service and attempted to leave a smaller tip than 18%, but the payment system would not allow him to pay less than the price of the food plus the 18% services charge. Other plaintiffs and consumers like Ghee have similar experiences paying at these two Applebee’s locations.
Based on the facts of the case, the plaintiffs allege the following violations: