Hospitality union UNITE HERE Local 11 has sent a letter to the owners and operator of the Tommie and Thompson Hotels in Hollywood warning that the 5% service fee charged by at least five related restaurants may violate LA’s service charge laws and threatening to take legal action on behalf of employees harmed by the practice. Last month, the Union also called on the Los Angeles City Attorney’s Office to investigate these potential violations.

Such automatic “service fees” can cause customers to tip their servers less when they believe that “service fees” are a substitute for gratuities. To fix this problem in hotel restaurants, UNITE HERE Local 11 helped pass a law in Los Angeles that requires hotel restaurants—including restaurants located within hotels, connected to hotels, or “operated in conjunction with” hotels—to pay service charges in their entirety to employees.

Local 11’s letter to the new owners and current operator alleges that hotel restaurants Ka’Teen, Bar Lis, Mes Amis, Terrace, and trendy Mother Wolf all charge a 5% “service fee.” The restaurants all confusingly state that the service fee is retained by the company but also state that the fee is “in support of health benefits for our staff.” Some employees allege that they do not work enough hours to qualify for health benefits, while others allege they do not earn enough money to pay the steep cost of health insurance.

The new owners of the hotel properties are Taconic Capital, Machine Investment Group, and Miramar Capital. After bailing out the original hotel developer, Relevant Group, in 2021, Taconic Capital and Machine Investment Group scheduled UCC foreclosure auctions for the properties. Originally scheduled for December 21, 2022, the foreclosure auctions were delayed until earlier this month. In the meantime, the restaurant operator Ten Five Hospitality LLC faces a federal unfair labor practice charge alleging that it unlawfully fired three workers after they asked management about the legality of the 5% service fee and engaged in other protected labor activity. The allegations are under investigation by the National Labor Relations Board.

“Relevant came into Hollywood promising to revitalize the neighborhood nightlife and create jobs for Angelenos, but these were empty promises,” says Kurt Petersen, co-president of Local 11. “So far, the new owners Machine, Taconic, and Miramar have done no better. Hollywood deserves better neighbors.”

UNITE HERE Local 11 is a labor union representing over 32,000 hospitality workers in Southern California and Arizona who work in hotels, restaurants, universities, convention centers, and airports

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