Party of 10? You May Not Get Service With a Smile

February 15, 2016
CBS News

Carolyn D. Richmond was featured in the CBS News article, “Party of 10? You May Not Get Service With a Smile.” Full text can be found in the February 15, 2016, issue, but a synopsis is below.

Some nationally recognized restaurant chains have recently received scrutiny from employees due to their elimination of auto-gratuity in an effort to avoid payroll taxes from the IRS.

Fox Rothschild’s Carolyn Richmond said the IRS didn't change its rules, but rather notified businesses that it would be enforcing them, while first giving restaurants time to come into compliance.

A number of casual-dining chains chose to opt out by removing auto-gratuity.

"It's not a gratuity if it's not left up to the customer's discretion," said Richmond. She added that the IRS views mandatory charges as part of the restaurant's revenue and taxes them accordingly. "If I pay my employees money out of the company coffers, I lose the FICA (Federal Insurance Contributions Act) tip credit, and it raises the overtime rates I have to pay my employees."

"The food service is a very sleepy industry with respect to oversight," Richmond said. "The spotlight hasn't been shined on the restaurant industry until the last 10 years or so, as we shifted from more of a manufacturing to a service industry economy with more minimum wage workers."

Click here to view the full article.

This article was also featured in a CBS19 article on February 15, 2016.