Colorado Court of Appeals holds that a banquet service fee is not a tip and therefore banquet server is not a tipped employee

The Colorado Court of Appeals held that a banquet server was entitled to overtime because he was not exempt under Colorado’s wage-hour laws as a tipped employee. The employer charged a service fee of 22% that was shared with all the servers, including plaintiff, allowing him to earn between $11.36 and $33.05 per hour depending on the amount of banquet sales.

Even though the service charge varied with the amount of sales, as a tip generally does, and even though in the, in the aggregate, it was well in excess of minimum wage, the court held that it did not constitute a tip because, because unlike a tip, which must be voluntary, banquet clients could not decide whether or how much of it to pay. Rather the company simply charged all banquet clients 22% of food and drink.

Additionally, the court rejected the company’s argument at the banquet server was exempt as a sales employee. The company had argued that by providing excellent service the banquet server enhanced sales, but the Court noted he had no actual sales responsibilities.

The case is of particular interest, because it illustrates how Colorado’s new wage-hour laws are likely to be applied by the CDLE and Colorado courts.

First the court was very clear that it was not deciding the case from scratch (“de novo”). Rather than the court explained, it was required to defer to the CDLE’s hearing officer’s decision, unless it was proven to be unsupported by substantial evidence or contrary to the plain meaning of Colorado’s wage-hour laws. The court went to some length to explain that it thought the company had raised a good argument that the service charge should have been considered a tip. But because the issue was arguable either way, the court felt it was required to defer to the CDLE’s hearing officer. 

Second the court noted that the case actually began with the plaintiff, incorrectly, trying to argue that he was, in fact, tipped. When he filed his claim, he argued that he had been shorted the amounts due him under Colorado’s tipped employee laws. When the CDLE investigated, it determined he was wrong, that he wasn’t tipped. But the CDLE didn’t stop there. Rather, it restructured his claim, then reconsidered his circumstances under the non-tipped employee wage-hour laws, and under those laws, laws that the plaintiff apparently had not himself put at-issue, the CDLE awarded him overtime under its own theory.

Thus, the case illustrates how the new Colorado wage-hour laws allow the CDLE broad discretion not only to decide the wage-hour claims filed before it, but also to decide how to structure those wage-hour claims in order to best award relief it determines is owed.

The case was Brennan v. Broadmoor Hotel, Inc.