A spooky court decision released on Halloween stirred up a cauldron of surprises for California employers over the question of contractual service charges. An appellate court in California ruled that mandatory service charges added by banquet facilities to their contracts may actually (and legally) be defined as gratuities and owed to banquet service employees! The employer, relying on the “settled law” of two longstanding earlier decisions where service charges were found not to be gratuities, distributed some of its 21% service charge to managers and retained the balance for itself. A suit on behalf of bartender/server Lauren O’Grady was filed by attorney Shannon Liss-Riordan alleging that the service charge amounted to a tip and rightfully belonged to the servers. A lower court dismissed the suit, but the First District Court of Appeal took a different view, ruling that defining tips as only money voluntarily left behind by customers was possibly too narrow a view and it sent the case back to the lower court for more factual deliberations on the nature of the service charge and whether it should be considered a gratuity. There’s always more coming from California, so we will keep you apprised.