Service charge

The service charge at this bustling Oakland bar has caused confusion and outcry. But is it really illegal?

One of the Bay Area’s busiest bars was slammed this week after reports it was giving managers an automatic 20% service charge cut that many assumed went to staff members instead of tips .

The debate over the bar, Oakland’s Slug, has exploded on social media, affecting both workers and customers at a tricky time for tip-free restaurants. Service charges are becoming more common in the Bay Area — and are often hailed as a positive change that offers higher and fairer wages — but are still often misunderstood by customers and even employees. For some industry players, this is a worrying example of how confusion about these fees can threaten what they see as beneficial change in the industry.

The controversy began when a former employee took to Instagram on Sunday to blast Slug, the team’s new natural wine bar behind the famed Snail Bar, for failing to disclose to new hires that managers share his service charge. She also said she was fired after questioning management about it, and her message quickly circulated in local industry circles.

Contacted by La Chronique, the former employee asked not to be identified but answered questions about her position. Other people interviewed for this story confirmed her story.

When Slug’s owners posted a response on Instagram this week, dozens of outraged comments poured in. Many wondered if what Slug was doing was legal.

Scallop crudo at Slug, a new wine bar and restaurant in Oakland. His service fee was the subject of public outcry this week.

Janelle Bitker/The Chronicle

Under California law, it is illegal for managers, as “agents” of an employer, to share workers’ tips. But it is legal for managers to receive money from service fees, which are collected by the owner and can also be allocated to workers’ benefits.

Oakland law allows restaurants to distribute a portion of service fees to managers, but only when they perform non-supervisory tasks, such as moving plates of food to tables or taking orders. But Oakland restaurants are required to clearly communicate this via a written policy provided to employees, which former employees and Slug owner Andres Giraldo Florez admits did not happen.

Sarah Lau, director of human resources at La Cocina, a San Francisco nonprofit, said it was unusual and “unethical” for restaurant managers to share service charges.

“For me, a service charge is a way to pay your staff more and get rid of the tipping culture. (It’s) definitely not to be shared with managers,” she said.

Many Bay Area restaurants have adopted service charges, but they remain controversial among some patrons and servers accustomed to earning more from tips. Yelp reviews at local no-tip businesses often cite confusion over the difference between automatic charges and tips.

Giraldo Florez said that because the Snail and Slug teams are small, managers often act as servers, couriers or bartenders. When they’re doing something managerial like payroll, they’re getting out of the service charge, he said.

Previously, Lau oversaw human resources at the Good Good Culture Club in San Francisco, where managers also often managed food and worked the floor. But, she said, they don’t share the restaurant’s service charge, she said.

Owners of Oakland's Snail Bar, above, and Slug have adjusted the amount managers receive a 20% service fee after a former employee was fired.

Owners of Oakland’s Snail Bar, above, and Slug have adjusted the amount managers receive a 20% service fee after a former employee was fired.

Andria Lo / Special for The Chronicle 2021

Since the former worker raised her concerns, Slug and Snail Bar have adjusted the service fee split. Managers, who previously received the same percentage, now receive less than waiters and kitchen staff, Giraldo Florez said. And Jake Michahelles, co-owner and general manager of Slug, will no longer receive any portion of the service fee. Giraldo Florez said he does not take any percentage from service charges. And any tips left by customers on top of service charges go directly to the server, he said.

But two former Slug employees said the bar’s previous policy was never communicated to them.

Neko Natalia, who worked as a waiter at the bar until recently, said they were “shocked and also very upset” to hear the managers were splitting the service charge. It seemed inappropriate, they said, for managers to get “a reduction in service charges, when staff work $18 an hour and really rely on the extra income from tips or service charges.”

Knowing how that income is shared is important, Natalia said, so “we can decide whether or not we want to work for this establishment.”

A short section on tip pooling in Slug’s employee handbook states that “the sharing structure fairly distributes employees who provide dining room services.” This language appears to be inconsistent with what is required by Oakland Measure FF’s ballot measure, which requires written notice and clear delineation of who is included in the service fee and how much they receive.

The Oakland City Attorney did not immediately respond to an interview request for this story.

Kaelyn Mahar, employment lawyer at San Francisco law firm Outten & Golden, said: “This all needs to be made very clear to the employee and also to the clients of the establishment. If that didn’t happen, it would have been an illegal service charge. »

Owner Andres Geraldo Florez stands behind the bar at Snail Bar in Oakland.  He opened Slug earlier this summer.

Owner Andres Geraldo Florez stands behind the bar at Snail Bar in Oakland. He opened Slug earlier this summer.

Jessica Christian/The Chronicle 2021

Giraldo Florez said that from now on, managers will inform any potential new employee “how each piece works”. Snail and Slug didn’t use paper menus, but he said he could print ones outlining that the service charge accrues to anyone working in the “service chain,” the legal definition of the FF metric.

Giraldo Florez said that on the advice of his lawyer, he would not comment on the former server’s allegation that the dismissal was a form of retaliation. In Oakland, it is illegal to fire an employee for complaining about non-compliance with the city’s service charge measure.

He said he felt frustrated with the online discussion of Slug’s service charges, which included calls to boycott his businesses and inaccurate legal interpretations. He said he was also concerned that the intent behind the service charge could be lost in the uproar.

“We all grew up in this industry as cooks paid like $9 an hour, not being paid overtime and being rushed until (we) broke,” said Giraldo Florez, who opened Snail after working in fine dining restaurants, including Saison in San Francisco. “We do it a little differently, but we have exactly the same principles, which is to make sure our employees are well paid, supported and not overworked.”

Christina Alexis, owner of the Bay Area Pleasure Principle catering business and longtime service industry worker, had just finished dinner at The Slug when she saw the Instagram backlash. She felt disappointed with the lack of transparency from the owners and said she wouldn’t be going back anytime soon.

“There is a hierarchy that exists. Tipped employees don’t have as much job stability or benefits,” Alexis said. “The least I can do to show my solidarity with people who don’t have such stable jobs or who don’t have as much job security is to not go to an establishment until that it becomes clear that the money is going to a place of integrity and ethical behavior.”

Slug was the first no-tip bar Natalia had worked at. They arrived enthusiastic about the model, preferring the constant bump to their salary to the unpredictable ups and downs of tips.

But Natalia quit after their co-worker was fired, reflecting on past service jobs they’ve had where owners weren’t transparent about pay.

“I was in favor of it, but now that I’ve learned…it’s operating in a gray area more, I don’t know how I feel about it anymore,” Natalia said.

Elena Kadvany (her) is a staff writer for the San Francisco Chronicle. Email: elena.kadvany@sfchronicle.comTwitter: @ekadvany