In a January 12, 2012 decision by Justice Scheinkman, the court denied the defendants’ motion to dismiss a class action complaint under CPLR §3211(a)(7), brought by current and former employees of the defendant catering companies which alleged that the defendants violated New York Labor Law § 196-d by misleading the customers to believe that a mandatory service charge on all orders was in lieu of gratuities and failing to distribute those service charges to the employees. Both sides argued that the case turned on the application of Samiento v World Wide Yacht, Inc., a 2008 decision by the Court of Appeals which held that Labor Law § 196-d is to be broadly construed and applied where a service charge, even if mandatory, purports to be a gratuity. The defendants argued that Samiento did not apply because there, the employer affirmatively told its customers that the service charge was remitted to the waitstaff as a gratuity, when in reality it was not. The plaintiffs, on the other hand, argued that the phrase “purports to be a gratuity” should liberally apply to passive conduct by the employer. The court found in the plaintiffs’ favor. It determined that the complaint sufficiently alleged a cause of action under section 196-d through the allegations that, by creating and imposing a service charge on customers without any explanation, and by barring employees from discussing gratuities with the customers under threat of termination from employment, the defendants created the prospect that a reasonable customer could believe that the charge was a gratuity and thus had policies that mislead the customers into believing that the charges were gratuities.
Martin v Restaurant Assoc. Events Corp., Sup Ct Westchester County, January 12, 2012. Scheinkman, J, Index No. 53700/11