Hawaii hotel workers can sue their employers for money the hotels collected as service charges but didn’t pass on to the employees, the Hawaii Supreme Court ruled Monday.
The ruling paves the way for potentially thousands of Hawaii service staff to recover remedies from their employers that could total millions of dollars, said attorney Shannon Liss-Riordan.
"We contend that service charges must be paid to employees," said Liss-Riordan. "When patrons pay service charges, it looks like a gratuity and then they don’t tip. We’ve brought cases like this across the country, but Hawaii is one of three states along with Massachusetts and New York that has an explicit law to address this issue."
Attorney Brandee Faria said the ruling also makes it possible for wronged workers to collect damages and interest.
"This ruling is going to be phenomenally huge for our clients," Faria said.
The decision means that pending lawsuits filed by three legal firms — Boston-based Lichten & Liss-Riordan, and Honolulu-based Bickerton Lee Dang & Sullivan and Perkin & Faria — can move forward.
Liss-Riordan’s firm has cases pending against Four Seasons, Ritz Carlton, Grand Wailea and Starwood-branded Hawaii hotels. Faria’s firm has similar cases pending, including one on behalf of consumers and another on behalf of employees at The Kahala Hotel & Resort.
Attorney Jim Bickerton said his firm has at least six cases pending, which include complaints against the Grand Hyatt Kauai Resort, the Hyatt Regency Waikiki Beach Resort and Spa, the Pacific Beach Hotel, the Pagoda Hotel, the Hilton Waikoloa Village and the Hilton Hawaiian Village Waikiki Beach Resort, which also faces a lawsuit brought by consumers who objected to what they called a lack of transparency in billing.
Hilton Hawaiian Village spokeswoman Cynthia Rankin said the company would not comment on a pending legal case.
Bickerton said that on average Hawaii hotels pocket as much as one-fifth to one-sixth of all service charges.
In 2000, Hawaii legislators passed a state law that required hotels and food and beverage outlets to disclose this practice so that workers got all the gratuities meant for them. Following the law, several hotels that had been taking a percentage of service fees without giving notice settled cases against them. But while plaintiffs who worked at the Fairmont, Prince, Renaissance and Turtle Bay hotels were paid settlements, cases against other hotels have been hung up in court for years.
The cases stalled in 2009 when defense lawyers for Four Seasons Hotel Ltd. argued that employees couldn’t sue under the state law because legislators placed it within an area of consumer protection statutes as opposed to labor and wages statutes. Following the challenge, U.S. District Judge Helen Gillmor referred the case to the Hawaii Supreme Court for interpretation.
"Potentially thousands will be affected by the decision that came out today," Liss-Riordan said. "The food and beverage industry throughout Hawaii has to recognize that they have to come into compliance with Hawaii state law."
Unite Here Local 5, which represents many Hawaii hotel workers, also lauded the ruling, calling it an important milestone for people who work for tips. While the union has built tip protection into its current contracts, Financial Secretary-Treasurer Eric Gill said, "For those workers who do not have the protection of a Local 5 contract, this decision is a step forward toward justice, fairness and better working conditions."
Bickerton said while some Hawaii hotels such as the Sheraton Waikiki always have been compliant with the law and others have become compliant since the court cases started, some had balked at compensating employees for past violations.
"This is a big step forward for fair labor because it makes it very clear that there’s a price for employers to pay if they don’t follow the law," Bickerton said.
Nick Bonar, one of two lead plaintiffs in a case that Bickerton’s firm previously settled against the Fairmont Orchid, said the decision is an important step for workers’ rights and could open other opportunities for them.
"It was disheartening to learn that (the Fairmont) was taking a portion of the service charge and not telling consumers. I felt like we’ve worked hard and only wanted what was rightfully ours," said Bonar, who received a check for $8,000 and now works as a wine distributor in Oregon.
"The back pay allowed me to do things that I would not have been able to do otherwise."
Since the Fairmont settled early, Bickerton said it did not have to pay workers double damages.
"Now someone in Nick’s position would get $16,000 or more," Bickerton said.
Since Bonar was a fairly typical member of the class, Bickerton said that many Hawaii hotels are looking at having to make substantial reimbursements.
"Some of these hotels have hundreds of workers, and many work long hours," he said.
Hotels that are being sued by consumers and employees could end up paying twice, Bickerton said.
