Hilton Hotels has agreed to pay $12 million to settle a class action lawsuit brought by banquet servers and event staff who alleged the hotel chain skimmed service charges that customers believed were tips. The lawsuit claimed that when hotels added mandatory “service charges” or “banquet fees” to event bills, customers reasonably assumed that money went to the workers who served them. Instead, the lawsuit alleged Hilton kept most or all of those charges as general revenue.
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Status: Settlement Approved
What Was the Practice?
When companies or individuals book banquets, conferences, or catered events at hotels, the final bill typically includes a mandatory percentage-based fee labeled as a “service charge,” “banquet service fee,” or similar term. Customers naturally assume this charge is a gratuity for the servers, bartenders, and kitchen staff who worked the event.
The lawsuit alleged that Hilton’s practice was to retain these service charges as hotel revenue rather than distribute them to the workers who actually served the events. In some cases, the employees received a small fraction of the charge; in others, they received nothing at all from the service fee and relied entirely on their base hourly wages.
This practice has a double impact. The workers lose out on money that customers intended as a tip. And customers are misled into thinking they have already tipped the staff, so they are less likely to leave an additional cash gratuity. The result is that banquet workers at these properties allegedly earned far less than what customers thought they were paying.
Who Is Covered by the Settlement?
The settlement class includes current and former banquet servers, bartenders, and event staff who worked at Hilton-branded properties during the class period and were affected by the service charge retention practice. The class covers workers at Hilton-owned and managed properties, though the exact geographic scope depends on the terms of the settlement agreement.
Individual payment amounts will be based on each worker’s employment duration and the amount of service charges processed at events they worked. Workers who were employed at high-volume banquet properties for longer periods will receive larger payments.
A Common Problem Across the Hospitality Industry
Hilton is not the only hotel chain facing these allegations. Similar lawsuits have been filed against Marriott, Hyatt, and other major hospitality brands over service charge practices. Several states, including California and Massachusetts, have passed laws requiring that mandatory service charges be distributed to employees, but enforcement has been inconsistent.
If you work in the hospitality industry and your employer charges service fees to customers, it is worth understanding your state’s laws on service charge distribution. In many jurisdictions, employers are required to pass these charges through to workers, and failure to do so can result in significant legal liability.
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This article is for informational purposes only and does not constitute legal advice. The information presented is based on publicly available court records and news reports. Written by Steve Levine for OpenClassActions.org.