For years, Hawaii hotels regularly collected millions of dollars in tips from customers but only passed a portion of those service fees to the employees who earned them.
Under a ruling by the Supreme Court today, that practice now violates Hawaii law. The high court said hotels and other businesses can only collect the tips if they disclose that they are going to keep some of the money.
Attorneys who filed class-action lawsuits on behalf of the employees say the hotels are liable for big damages.
"I would say it's going to be north of $10 million. we have $3 million on one hotel on Kauai alone," said attorney John Perkin, whose firm has filed eight of these suits.
Boston attorney Shannon Liss-Riordan, whose firm is also handling eight different class-actions against Hawaii hotels, said the ruling has broad applications beyond the hospitality industry.
"This will affect the food and beverage industry in Hawaii," she said.
"It will affect hotels, restaurants and other food and beverage establishments, catering companies, country clubs."
The cases are potentially costly because the ruling says that hotel workers can collect damages of up two times the amount in tips that the hotels took.
Two justices -- Simeon Acoba and Derrick Chang -- thought the hotels could be liable for treble damages, meaning that the potential payouts could be in the range of tens of millions of dollars.
"There's hundreds of employees who are owed money and it usually comes to millions of dollars per hotel," Liss-Riordan said.
"It's a lot money that these hotels have made off of this deception over these years."
The hotels declined comment when asked about the case. Legal experts say they're likely settle the cases for millions of dollars since the hotels do not contest the amount of tip money that they took in.
Some of the hotels have already settle cases or were hit by adverse rulings. They include the Fairmont Hotel on the Big Island which paid $2.2 million and the Pacific Beach and Pagoda hotels, which paid a total of $2 million.
Today's ruling came in the case involving two Maui hotels: the Wailea Marriott Resort and the Westin Maui. Several banquet service workers alleged in their lawsuit that the hotels imposed a 20 percent service charge but did not distribute the proceeds to workers.
Eric Gill, financial secretary for hotel union UNITEHERE! Local 5, called the ruling a major milestone for workers in the service industry.
"The Hawaii Supreme Court has upheld workers' rights to recover money from employers who have failed to inform customers that the company is dipping into the service charge," Gill said.
"Tipped workers are hurt by this because customers mistakenly believe the money they leave goes to the worker who provides the service."
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