A Massachusetts federal judge sided with a Domino’s Pizza employee this month by refusing to toss a class action lawsuit accusing the pizza chain of misleading customers into believing that its delivery charges are passed on to employees, saying that Domino’s notices that the mandatory customer charge isn’t a tip could be insufficient.
Domino’s delivery driver Eduardo Carpaneda sued the company in August 2013, arguing that the “delivery charge” that Domino’s tacks on to customer bills is a service charge under the Massachusetts Tips Act. Accordingly, Domino’s violated the Tips Act by failing to turn over the proceeds of the fee to drivers.
Under the Tips Act, a service charge is defined as:
“[A] fee charged by an employer to a patron in lieu of a tip to any wait staff employee, service employee, or service bartender, including any fee designated as a service charge, tip, gratuity, or a fee that a patron or other consumer would reasonably expect to be given to a wait staff employee, service employee, or service bartender in lieu of, or in addition to, a tip.”
The Act further provides that if the employer submits a bill to the patron charging the service charge, the total proceeds of that service charge shall be passed to the service employee in proportion to the service provided by those employees.
Employers are shielded from violations if they tell customers in writing that the mandatory customer charge is retained by the employer and does not represent a tip or service charge for wait staff employees, service employees or bartenders. Carpaneda argues that the $2.50 fee charged to customers is “within the range of what an objectively reasonable customer would pay as a tip to a driver.”
Delivery Fee or Service Charge?
Domino’s Pizza fought back against Carpaneda’s service charge claims by noting that in three separate instances during the pizza ordering process it advises customers that the added $2.50 will not go to the driver.
Judge William G. Young deliberated about whether or not these notices were enough to advise an “objectively reasonable customer” of the difference between a delivery fee and a tip.
“It is undisputed that, except when ordering by phone, Domino’s informs its clients before paying that the ‘delivery charge’ does not constitute a tip for employees. Carpaneda, however, claims that the question of whether the notice provided by Domino’s is sufficient to comply with the requirements of the safe harbor of section 152A of the Tip Act is a question for a fact finder that cannot be resolved at the motion to dismiss stage,” Judge Young said in a Jan. 9 order denying Domino’s motion to dismiss the class action lawsuit.
“In cases where the employer provided notice to the patron stating that a certain fee did not constitute a tip or service charge, courts have focused on whether a reasonable customer would understand that the employer did not distribute the fee amongst employees,” Judge Young said, adding:
“It ought also be noted that, unlike other online ordering systems where the customer can add to the total price the amount of money he wishes to tip, Domino’s web page automatically displays the amount due including the delivery charge, but does not permit the customer to add a tip. This system, coupled with the fact that $2.50 is an amount comparable to what an average customer might pay as a tip, makes it plausible that a reasonable customer would interpret the delivery charge as a tip. Carpaneda has therefore pled facts regarding the delivery charge nature to establish a claim under the Tips Act.”
The Domino’s Pizza Delivery Charge Class Action Lawsuit is Eduardo Carpaneda v. Domino’s Pizza Inc., et al., Case No. 13-cv-12313, in the U.S. District Court for the District of Massachusetts.
Service Charge Lawsuits Grow Under New Wage Guidelines
Similar wage lawsuits are likely to grow because of changes to wage and hour guidelines by the Internal Revenue Service indicating that mandatory service charges and customer charges should count as wages for employees. The new rules have been in effect since Jan. 1, 2014.
Service employees who feel that they have not been paid properly may have legal options available to them to seek owed back wages. Learn more and receive a free case evaluation by an employment lawyer at the Service Charge, Wage & Hour Class Action Lawsuit Investigation today.
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