The five-unit Skillet diner chain in Seattle has agreed to pay employees $318,782.48 and a $4,958.25 fine to the city for allegedly misallocating proceeds from a service fee and denying workers meal and rest breaks.
City authorities said the restaurants had led customers to expect that proceeds from a surcharge on their tabs would be channeled exclusively to front-of-house workers as part of their compensation. Instead, the funds were used to defray the restaurant company’s overall labor expenses and other overhead, with none of the money going directly to dining-room workers, according to the officials.
The Skillet Restaurant Group was also accused by Seattle’s Office of Labor Standards of firing an employee who objected to the way proceeds from the service fee were allocated.
Another employee was allegedly terminated for calling out sick without lining up a replacement, a violation of the city’s paid sick leave regulations.
The nearly $319,000 in allegedly misallocated funds will be distributed to 181 employees. Seattle officials said Skillet currently employs 100 workers, indicating that some past staff members will receive a pay-out.
The settlement between the city and Skillet comes as service fees are widely being embraced by restaurants as a way of offsetting steep climbs in food and labor costs. Some jurisdictions, like Washington, D.C., are demanding that restaurants using a surcharge explicitly spell out how the proceeds will be used and are legally bound to spend the money only for that stated purpose.
But other locales, including most of California, impose no disclosure or usage mandates. Unless customers are explicitly informed that the proceeds will go toward labor or employee benefits, a restaurant can use the money in whatever way it wishes, or just drop it to the bottom line.
Because of pushback from consumers, the Federal Trade Commission is looking at ways of monitoring the use of service fees. The industry has embarked on a grass-roots campaign to prevent the watchdog agency from overreaching and outlawing such restaurant conventions as charging extra for delivered orders or automatically tacking a gratuity onto the tabs for big parties.
The Office of Labor Standards said in announcing the settlement with Skillet that the company operates four restaurants in the Seattle area. But Skillet’s website lists five locations, including one at Seattle-Tacoma International Airport.
Skillet had not responded by the time this story was posted to a request for comment.
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