A former server at Found Oyster filed a class-action lawsuit on Wednesday, January 31, against parent company Last Word Hospitality, alleging that the company withheld tips in the form of service fees added to final bills. The complaint was filed in Los Angeles County Superior Court on behalf of all food and beverage service employees who have worked at Last Word restaurants at any time during the relevant four-year statute of limitations, according to the plaintiff’s attorney Shannon Liss-Riordan.

Plaintiff Madison Bradfield-Davis claims she and “class members have not received the total proceeds of the gratuities to which they are entitled under California law,” alleging that Last Word had “a policy and practice of retaining for themselves a portion of these gratuities and/or using a portion of these gratuities to pay managers or other non-service employees.” The suit hinges on four points: whether funds collected from the restaurant service fees constitute gratuities; whether the company failed to distribute the total proceeds; if Last Word retained a portion of the fees; and whether the company retained a portion to pay managers or other non-service employees.

Last Word Hospitality encompasses a vast catalog of restaurant properties in California including Found Oyster, Queen St., Barra Santos, and Nossa Caipirinha Bar in Los Angeles; Red Dog Saloon in Pioneertown; and the Copper Room in Yucca Valley, whose employees could be impacted by the suit.

Reached by Eater, Last Word Hospitality co-founder Adam Weisblatt issued the following statement:

Deciding to enact a service charge was an ethical decision of how to run a restaurant that equitably pays staff. We want to create meaningful careers and see this as an important aspect of being good employers. Dishwashers are as important to us as managers. 100 percent of service charges goes to FOH and BOH staff and their benefits. We do not use service charges to pay base wages. The statements on our menu and website and checks are accurate, legal, and transparently shared with the entire staff. We will address the lawsuit with the same good intentions we hold ourselves to in all forms of business.

At U.S. restaurants, diners typically expect to pay a 15 to 20 percent tip on top of bills. California law states that these tips are the property of the employees, and must be given in full to staff who provide direct table service or are involved in the “chain of service.” Tips can be pooled and shared with other staff such as bussers and bartenders, but cannot be used to compensate owners, managers, or supervisors. Surcharges of 3 to 5 percent have become commonplace on the bottom of menus, with notes calling them healthcare surcharges or fees to compensate for increasing costs. Some restaurants have gone further, introducing larger compulsory service fees of 20 percent or more, purportedly to guarantee staff a predictable wage in place of a tip arbitrarily determined by the customer, and in some cases to level the playing field between front- and back-of-house staff.

The ethics surrounding tipping and pay discrepancies between front- and back-of-house staff is an ongoing conversation happening throughout the service industry centered on the tipped minimum wage. The State of California already requires employers to pay a standard minimum wage as opposed to a tipped minimum wage (a combination of a lower hourly wage plus gratuity that must average out to the state’s minimum hourly wage).

Last Word restaurants Found Oyster, Barra Santos, Queen St., Copper Room, and Nossa Caipirinha Bar all add a 20 percent charge, while Red Dog Saloon adds a 16 percent charge, according to menus posted on business websites. (Eater reached out to verify these percentages and Weisblatt declined to comment.) Its newest takeout-only eatery, Shins Pizza, does not charge a service fee but does accept standard tips through its online ordering system.

Wonho Frank Lee

Wonho Frank Lee

Allison Zaucha

The lawsuit against Last Word argues that the percentage amount is confusing to customers who may think the fee is a replacement for leaving a customary tip. “This service charge has been in the form of an automatic charge which customers are required to pay and which reasonably appears to be a gratuity for the service staff,” the complaint states. “When customers have paid these 20 percent service charges on [Last Word Hospitality’s] bills, it is reasonable for them to have believed they were gratuities to be paid to the service staff, as that is customarily the percentage added as gratuity or tip in the hospitality industry.”

Bradfield-Davis, on behalf of fellow employees covered by the suit, is asking to be compensated for all funds allegedly not distributed, plus interest, attorney’s fees, and other expenses.

The complaint is similar to an ongoing lawsuit filed against Jon & Vinny’s in June 2023 in which servers claimed that customers could have reasonably believed the restaurant’s 18 percent service fee was a gratuity for service staff. (Attorney Shannon Liss-Riordan represents the employees at Jon & Vinny’s and Last Word Hospitality in their respective lawsuits.) These lawsuits raise questions across the Los Angeles restaurant industry about the use of service charges and whether they actually confuse consumers, or lead diners to conflate them with tips. Service fees have become a flashpoint across the country, even sparking Reddit users to list all LA and Chicago restaurants that charge them.

In 2019, a state appeals court ruled that service charges belonged to employees under California law if they are reasonably viewed as tips by customers. In May 2023, a judge found that San Francisco Marriott Hotel illegally kept about $9 million in banquet “service charges” that customers reasonably understood to be tips for good servers, according to the San Francisco Chronicle. The hotel was ordered to pay fees to hundreds of banquet servers who worked for the company between 2012 to April 2017.

Founded by Holly Fox and Adam Weisblatt in 2014, Last Word Hospitality made a big splash with its 2019 opening of Found Oyster, in partnership with chef Ari Kolender, garnering praise for its East Coast oyster bar fare. They’ve become operators of other popular LA restaurants, including Barra Santos, which was listed as a 2024 James Beard Award semifinalist for Best New Restaurant. The group’s follow-up to Found Oyster, Queen St., opened in Highland Park in June 2023.

On each of its restaurant menus, Last Word states that the service fee is “given in its entirety to the staff for equitable earnings, medical, and retirement benefits.” Each restaurant’s website offers the company’s rationale for charging the service fee. For example, the Copper Room’s reads:

The Copper Room is committed to creating a workplace where the delineation between FOH and BOH is blurred, earnings are more equitable, and careers progress with increased earnings along with increased responsibility. It is our goal to provide a path that can begin at any position, advance into management, and eventually into ownership.

Although the cultural construct of tipping culture is still prevalent, we believe the practice is outdated. We firmly believe that the future of restaurants will reflect the international model, where staff is not reliant on gratuities from guests, and earnings are more stable. The service charge model is the first step in this process, and we hope to lead the way as progressive operators.

Last Word’s statement acknowledges the issues inherent in tipping culture in restaurants and attempts to use service charges as a way of changing the compensation model for staff. In two current job openings written at the time of publication, Last Word said compensation of base hourly pay of $16.78 (the current minimum wage in Los Angeles) plus service charges would average $30 to $35 for the positions of oyster shucker or line cook. The listings also noted compensation would include health insurance and tips.