Service Charges: Washington’s Service Businesses Must Disclose Employee Share

As of July 23, 2007, service-oriented businesses in Washington state, such as restaurants, bars, convention centers and hotels, must disclose to customers what portion of a “service charge” goes to the employee(s) serving the customer. This disclosure must be clearly printed on all itemized receipts and all menus. The law requires disclosure even if the service charge is not labeled as such. Service charges include all charges on receipts and menus, such as "service charge," "gratuity," "delivery charge," or "porterage charge."

When a business lists a "service charge" on a bill, customers often assume that that portion of the bill is going to the servers; that is not always the case. The new law ensures that customers know where that money is going.

While the law does not define "serving the customer," the definition of "employee" provides guidance as to the breadth of the new law. An "employee" is a nonmanagerial, nonsupervisory worker. The definition includes, but is not limited to, servers, busers, banquet housemen, banquet captains, bartenders, barbacks and porters. Thus, this new law covers employees providing both direct and indirect service to customers.

It is suggested that all service-oriented businesses include the following or similar language on their menus: "A service charge of __% will be added for parties of __ or more. Of that amount, __% will be paid directly to your server(s)." The following language should be included on all itemized receipts: "A service charge of __% has been added to your bill. Of that amount, __% will be paid directly to your server(s)."