On May 9, 2011, a group of Yankee Stadium food service workers filed a complaint in the Southern District of New York alleging that the stadium’s concession providers withheld tips in violation of the New York Labor Law (“NY Labor Law”). The workers allege that the concession providers at the new and old Yankee stadiums kept the 20% service charge added to the cost of food and drinks served to certain field level fans. The workers claim that the menu for the field level seats states, “A 20% service charge will be added to the listed prices. Additional gratuity is at your discretion.” The case is entitled Ryan et al. v. Legends Hospitality, LLC, and the proposed class allegedly consists of one hundred members.

The case is notable in that it highlights an increasingly rare phenomena – – a divergence between state and federal wage and hour law. Under the federal law, the Fair Labor Standards Act, a compulsory service charge does not constitute a tip, but rather is counted toward the employer’s gross receipts. In contrast, the NY Labor Law, provides that an employer cannot “retain any part of a gratuity or any charge purported to be a gratuity for an employee.”

The New York Court of Appeals has previously interpreted this language to require that an employer is prohibited from withholding a mandatory service charge or fee if a “reasonable patron” would have believed the service charge to be gratuity. Accordingly, the employers in Ryan et al. v. Legends Hospitality, LLC appear to have a difficult road ahead of them since the menu states, as alleged by plaintiffs, that “additional gratuity is at your discretion.”

The lesson here is that employers need to be mindful of state, as well as federal, wage and hour law. While state and federal law is typically consistent, a difference such as discussed in Ryan et al. v. Legends Hospitality, LLC, can lead to significant problems.