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Member Alert: Attorney General Forces Seamless to Stop Charging Fees on Gratuities

Wednesday, April 16, 2014   (0 Comments)
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Today, the Attorney General announced the settlement of an ongoing investigation regarding Seamless / GrubHub (now operating as GrubHub) and their practice of charging fees to restaurants that were based on the entire customer order, including a charge to restaurants based on the customer's gratuity.  Seamless / Grubhub is one of the largest online food ordering and delivery platforms. The company, formed in a late 2013 merger, also owns MenuPages and AllMenu brands. Since restaurants have to pay the entire gratuity to the staff under New York State law, this practice effectively made the Seamless / GrubHub rate much higher.  The Seamless fee can be nearly 20% of a delivery order and Seamless has recently advised restaurants that it is seeking to increase that fee. 

According to the terms of the settlement, the Attorney General will call for Seamless / GrubHub to:

1. Not include a customer's gratuity when calculating its service fee; 
2. Provide information to the Attorney General's office to ensure it is in compliance with the settlement; 
3. Provide guidance on proper tip handling and gratuity best practices to all restaurant customers; and, 
4. Renegotiate contracts with its restaurant customers clarifying the new fee structure to comply with the settlement. 

Restaurants will not receive back any fees charged on gratuities prior to this settlement.

“Online sites like Seamless already sap valuable revenues from restaurants. The true victims in this case are the thousands of restaurateurs who had to pay a fee to Seamless based on gratuities, which is a questionable legal practice under New York State law. This practice effectively increased the already high rates charged by Seamless to its restaurant customers. The more revenue restaurants generate, the more money they have to increase wages and benefits to their employees. We are hopeful this settlement will assist restaurants by reducing the fees they must pay to participate in the Seamless on-line delivery community,” said Melissa Autilio Fleischut, President and CEO of the New York State Restaurant Association.

View the Attorney General's press release and statement online.

Our team will continue to monitor this issue for restaurants and determine if there are any opportunities for restaurants to recoup past fees charged by Seamless against customer gratuities. With any questions, please contact the NYC Office at 212.398.9160 or info@NYSRA.net.

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