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Electronically Filed Supreme Court SCWC-XX-XXXXXXX 25-AUG-2025 08:21 AM Dkt. 26 OP
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---o0o---
RENELDO RODRIGUEZ, individually and on behalf of all others similarly situated, Petitioner/Plaintiff-Appellee,
vs.
MAUNA KEA RESORT LLC; HAWAII PRINCE HOTEL WAIKIKI LLC; PRINCE RESORTS HAWAII, INC., Respondents/Defendants-Appellants.
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-XX-XXXXXXX; CASE NO. 1CC161002191)
AUGUST 25, 2025
RECKTENWALD, C.J., MCKENNA, EDDINS, GINOZA, and DEVENS, JJ.
OPINION OF THE COURT BY EDDINS, J.
Hotels and restaurants that apply a service charge for food
or beverage services must “distribute the service charge
directly to its employees as tip income” or “clearly disclose”
to consumers that the service charge is being used to cover *** FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER ***
“costs or expenses other than wages and tips of employees.”
Hawaiʻi Revised Statutes (HRS) § 481B-14 (Supp. 2015).
HRS § 481B-14 serves a dual purpose. It lessens consumer
confusion and protects tip-earning employees.
Food and beverage server Reneldo Rodriguez sued Mauna Kea
Resort LLC, Hawaii Prince Hotel Waikiki LLC, and Prince Resorts
Hawaii, Inc. (collectively, Mauna Kea). He alleges Mauna Kea
applied service charges but neither (1) distributed the entirety
of those service charges as gratuities to servers, nor (2)
clearly disclosed to consumers that it would not distribute the
entirety of those service charges to servers. That violates HRS
§ 481B-14 and defeats its purposes, Rodriguez says.
Rodriguez points to Mauna Kea’s pre-2017 disclosures that
read: “[W]e allocate a portion of the service fee to our
employees as tips or wages[.]” Those disclosures are no good,
he maintains.
The circuit court agreed with Rodriguez. The Intermediate
Court of Appeals (ICA) did not.
Over the years, this court has addressed when a disclosure
is required. See, e.g., Davis v. Four Seasons Hotel Ltd., 122
Hawaiʻi 423, 228 P.3d 303 (2010) (Davis I); Villon v. Marriott
Hotel Servs., Inc., 130 Hawaiʻi 130, 306 P.3d 175 (2013);
Gurrobat v. HTH Corp., 133 Hawaiʻi 1, 323 P.3d 792 (2014); and
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Kawakami v. Kahala Hotel Invs., LLC, 134 Hawaiʻi 352, 341 P.3d
558 (2014) (Kawakami I).
But in each of those cases, a hotel or restaurant made no
disclosure at all. For the first time, we are asked to rule on
the sufficiency of a disclosure.
We hold that the ICA erred in concluding that Mauna Kea’s
2010-2016 disclosures did not violate HRS § 481B-14.
We also hold that the ICA erred by finding that Mauna Kea
met its “burden of establishing that its service charge
disclosures were sufficient[.]” It ruled that Mauna Kea’s
motion for summary judgment should have been granted for that
reason. But the ICA offered no reasoning as to whether Mauna
Kea “clearly disclosed” to consumers that the service charge was
not a tip.
Last, we advance the legislative intent. When some, but
not all, of a service charge goes directly to employees as tips,
the employer must inform consumers the amount or percentage of
the service charge that is paid to food and beverage servers.
I.
In December 2016, Rodriguez brought a class action suit
against Mauna Kea on behalf of “over 100 servers, porters,
bartenders and other employees” (collectively, Rodriguez). He
filed an amended complaint in January 2017. From 2010-2016,
Mauna Kea had failed to adequately disclose to customers that
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part of the service charge would not be distributed to the
employees, Rodriguez alleged. And Mauna Kea, he added, had
retained that part.
The Mauna Kea banquet contract disclosure from 2010-2016,
for example, read in part: “[W]e allocate a portion of the
service fee to our employees as tips or wages and a portion of
the service fee to pay for costs or expenses other than wages
and tips of employees.”
Rodriguez claimed that Mauna Kea’s disclosures violated HRS
§ 481B-14(a):
(a) Any:
(1) Hotel or restaurant that applies a service charge for the sale of food or beverage services; or
(2) Hotel that applies a service charge for porterage services;
shall distribute the service charge directly to its employees as tip income or clearly disclose to the purchaser of the services that the service charge is being used to pay for costs or expenses other than wages and tips of employees.
HRS § 481B-14(a) (emphasis added).
Mauna Kea updated its disclosures later in 2017 to specify
what percentage went to employees and clarify that the service
charge was not a tip or gratuity. Looking again at Mauna Kea’s
banquet contract disclosure, the 2017 update reads:
All food and beverage functions are subject to a mandatory 22% surcharge, which consists of [a] 16% gratuity that is pooled and distributed to those food and beverage staff servicing you and your function, and the remaining 6% is retained by Hotel to cover non-itemized costs of the event (and not distributed as a tip or gratuity to the Hotel’s employees). The Banquet Service Charge is subject to State
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Tax, which is subject to change without notice. The mandatory surcharge will be posted to your Master Account.
Mauna Kea and Rodriguez filed dueling motions for summary
judgment (MSJ) in the Circuit Court of the First Circuit.
Because Mauna Kea tracked HRS § 481B-14’s language and told
customers that a portion of the service charge was used to pay
for “costs or expenses other than the wages or tips of
employees,” Mauna Kea insisted its 2010-2016 disclosures were
fine.
Rodriguez countered. Mauna Kea’s disclosures were not only
deficient, but were “misleading and actually outright false.”
They tricked customers into believing that the service charge
they paid would go to the servers as tip income.
Rodriguez prevailed. The circuit court granted Rodriguez’s
MSJ and denied Mauna Kea’s MSJ. Mauna Kea had failed to
“specify the portion of the service charge that was distributed
to employees[,]” the court ruled.
The ICA disagreed. Per the plain language of the statute
and its legislative history, the ICA held that “the circuit
court wrongly interpreted HRS § 481B-14 to require service
charge disclosures to specify the actual amount distributed to
employees.” It felt this requirement went “beyond the scope of
the statutory language.” The ICA ruled that the circuit court
should have granted Mauna Kea’s MSJ. It vacated the court’s
judgment and remanded the case.
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Rodriguez appealed. We accepted cert.
II.
A. HRS § 481B-14’s plain text and legislative history show that disclosures must clearly signal to customers whether a service charge is a tip
HRS § 481B-14 directs a hotel or restaurant to (1)
“distribute the service charge directly to its employees as tip
income” or (2) “clearly disclose” to the consumers “that the
service charge is being used to pay for costs or expenses other
than wages and tips of employees.”
Statutory interpretation begins with the law’s words.
Alpha, Inc. v. Bd. of Water Supply, 154 Hawaiʻi 486, 490–91, 555
P.3d 173, 177–78 (2024). HRS § 481B-14’s plain text
contemplates a binary choice. Rodriguez and Mauna Kea agree on
that. The restaurant or hotel may give all service charge money
to the employees as tips. Or they can clearly disclose.
The legislature’s inclusion of “clearly” has meaning. It
can’t be read out of the statute. Courts “give force to and
preserve all words of the statute.” State v. Chang, 144 Hawaiʻi
535, 548, 445 P.3d 116, 129 (2019) (citations omitted). When a
term is not statutorily defined, “we may resort to legal or
other well accepted dictionaries as one way to determine the
ordinary meaning[.]” State v. Tran, 154 Hawaiʻi 211, 221, 549
P.3d 296, 306 (2024) (cleaned up).
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“Clearly” is undefined in the statute. But Black’s Law
Dictionary defines “clear” as “so plain that a reasonable person
would have no difficulty in comprehension; capable of being
understood with only a single plausible interpretation.”
Black’s Law Dictionary 319 (12th ed. 2024). To be clear is to
be “free from obscurity or ambiguity,” “easily understood,” or
“unmistakable.” Clear, Merriam-Webster Dictionary,
https://www.merriam-webster.com/dictionary/clear
[https://perma.cc/5LYW-2SWH].
So when a hotel or restaurant does not disperse 100% of a
service charge as tip income, it must disclose this fact in a
way consumers can understand. See Kawakami I, 134 Hawaiʻi at
360, 341 P.3d at 566; Gurrobat, 133 Hawaiʻi at 17-18, 323 P.3d at
808-09. The disclosure must be unambiguous. The legislature’s
requirement to “clearly disclose” means that there should only
be one plausible interpretation of that disclosure.
But HRS § 481B-14 does not mention what it means to
“clearly disclose.” Does it mean specifying percentages?
Reciting buzzwords like gratuity, wages, or tips? Does it mean
the disclosure must be displayed conspicuously on the receipt –
not in tiny print? The statute is ambiguous.
Where there is ambiguity, we look at the legislative
history. Alpha, 154 Hawaiʻi at 491, 555 P.3d at 178.
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The legislature crafted HRS § 481B-14 to “advise customers
that the service charge is being used to pay for costs or
expenses other than wages and tips of employees.” 2000 Haw.
Sess. Laws Act 16, § 1 at 22.
There is a dual purpose: (1) to reduce consumer confusion
and (2) to protect servers’ tips. See id. at 21-22.
The legislature found that consumers generally understood
that service charges were “levied in lieu of a voluntary
gratuity,” and were “distributed to the employees providing the
service.” S. Stand. Comm. Rep. No. 3077, in 2000 Senate
Journal, at 1286-87.
But that wasn’t always the case. Id. Sometimes the
employer used the service charges to cover the employer’s
administrative costs. Id. And consumers left no tip for the
employee, mistakenly believing the service charge had already
covered it. Id.; H. Stand. Comm. Rep. No. 479-00, in 2000 House
Journal, at 1155. The legislature intended HRS § 481B-14 to
patch this problem and “prevent consumers from being misled
about the application of moneys they pay as service charges[.]”
S. Stand. Comm. Rep. No. 3077, in 2000 Senate Journal, at 1287.
The legislature also designed HRS § 481B-14 to support
workers: “hotel and restaurant employees may not be receiving
tips or gratuities.” 2000 Haw. Sess. Laws Act 16, § 1 at 21.
Through three forms of the bill, three committee reports, and
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Act 16 as signed into law by the Governor, the bill had one
title – “Relating to Wages and Tips of Employees.” Davis I, 122
Hawaiʻi at 432-33, 228 P.3d at 312-13. The legislature drafted
the statute to protect tip-receiving employees from having tips
withheld or credited to their employers. H. Stand. Comm. Rep.
No. 479-00, in 2000 House Journal, at 1155. Because a hotel or
restaurant withholding a service charge without disclosure
impacts both employees and consumers, the legislature was
concerned with those unpleasant impacts.
Thus, HRS § 481B-14’s plain language and legislative
history establish that disclosures must clearly notify customers
whether a service charge is a tip.
B. Mauna Kea’s pre-2017 disclosures were insufficient
Mauna Kea maintains its pre-2017 disclosures met HRS
§ 481B-14’s clear disclosure requirement. Its 2010-2016
disclosures mirror the statute, Mauna Kea says, by informing
consumers “we allocate a portion of the service fee to our
employees as tips or wages and a portion of the service fee to
pay for costs or expenses other than wages and tips of
employees.” Copying the language makes the disclosure
sufficient, Mauna Kea insists. “All you have to do is say that
the service charge is being used to pay for the employer’s costs
or expenses other than wages or tips.”
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Rodriguez protests. Simply reciting the statute’s language
isn’t enough. And the ICA erred, he believes, by siding with
Mauna Kea without adequately considering whether Mauna Kea’s
2010-2016 forms clearly disclosed to consumers that the service
charge was not a tip.
Rodriguez is right. The ICA erred.
The ICA had no analysis regarding whether Mauna Kea’s pre-
2017 disclosures were clear in light of HRS § 481B-14’s dual
purpose to reduce consumer confusion and protect servers’ tips.
Rather, the ICA reasoned that the plain language, legislative
history, and HRS § 481B-14 case law do not expressly instruct a
hotel or restaurant to “specify with particularity the fraction
or percentage of the service charge that is distributed to
employees.” Thus, it found that Mauna Kea had met its burden to
establish its disclosures were sufficient.
We conclude that rotely reciting HRS § 481B-14’s language
is not enough to satisfy that law’s clear disclosure requirement
and intent. Validating that practice elevates form over
substance, a disfavored approach. See Coon v. City & Cnty. of
Honolulu, 98 Hawaiʻi 233, 254, 47 P.3d 348, 369 (2002).
Plus, even if a copy-and-paste method worked, Mauna Kea’s
disclosures told customers that “a portion” of the service
charge went toward costs or services other than wages or tips.
Mauna Kea’s 2010-2016 catering disclosure contracts, for
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example, read: “[W]e allocate a portion of the service fee to
our employees as tips or wages and a portion of the service fee
to pay for costs or expenses other than wages and tips of
employees.” (Emphases added.)
This language injects ambiguity into the disclosure. Does
a portion of the service charge mean nearly all of it? Or
almost none of it? Does “a portion” to “tips or wages” mean
that none of the service charge is allocated to tip income? Or
does it mean that nearly all of it is? It’s any consumer’s
guess. And that reinforces our point – just because some of a
disclosure’s language tracks the statute’s language, doesn’t
mean a disclosure is clear and meaningful.
Mauna Kea’s “portion” disclosures also skirt HRS § 481B-
14’s dual purpose. A disclosure is meant to both inform
consumers and protect servers in situations where a consumer
thinks they have tipped by paying a service charge, yet the
hotel has diverted those funds for another purpose. See S.
Stand. Comm. Rep. No. 3077, in 2000 Senate Journal, at 1286-87.
It follows that a vague disclosure that says “a portion” is
used for tips or wages and a portion is used for “other costs,”
does not satisfy these purposes. That language does not inform
consumers whether they have adequately or sufficiently tipped
the employee in acknowledgement and appreciation of their good
service. And it doesn’t ensure employees receive their tips.
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All “a portion” conveys is that some percentage greater than
zero percent but less than one hundred percent goes to the
employee. That indefinite range ignores HRS § 481B-14’s dual
purposes.
Mauna Kea’s disclosures clearly fail. They do little to
inform the consumer whether or not to tip, and how much to tip.
And they do little to ensure employees receive tips.
We hold that the ICA erred in reversing the circuit court’s
grant of summary judgment to Rodriguez and granting summary
judgment to Mauna Kea.
C. This court’s previous analyses of HRS § 481B-14 suggest that disclosures must distinguish between wages and tips
Under HRS § 481B-14, hotels and restaurants have two
choices when it comes to service charges – they can either (1)
“distribute the service charge directly to its employees as tip
income” or (2) “clearly disclose to the purchaser of the
services that the service charge is being used to pay for costs
or expenses other than wages and tips of employees.” HRS
§ 481B-14(a) (emphases added).
But many of Mauna Kea’s pre-2017 disclosures read: “[W]e
allocate a portion of the service charge to our employees as
tips or wages.” (Emphasis added.) And all the service charges
Mauna Kea distributed to employees were “recorded as wages,” not
as tips.
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Mauna Kea says the distinction between wages and tips is
just semantics. There is no difference between wages and tips
under HRS § 481B-14 because the terms are synonymous. Mauna Kea
also says the service charge portion for “tips or wages” goes
fully to wages solely for tax reasons, not to reduce employee
pay. Thus, it did not mislead consumers, Mauna Kea maintains,
when it disclosed that a portion of the service charge went to
“tips or wages.”
Rodriguez disagrees. A disclosure announcing that a
service charge goes toward “tips or wages,” but does not go
toward tips at all, fails to meaningfully inform a consumer
under HRS § 481B-14, he maintains.
Rodriguez is right.
Context matters. This court has distinguished between
enforcement and disclosure.
Villon focused on enforcement. It held that HRS § 481B-
14’s plain language and legislative history show that “tip
income” and “wages and tips” are used synonymously in the
statute for enforcement purposes under the wage statute, HRS
§ 388–6 (2015). 130 Hawaiʻi at 135, 306 P.3d at 180.
But Villon only assessed an employers’ authority to
withhold tips and service charges under HRS § 388–6. Id. at
132, 306 P.3d at 177. It did not address whether tip income and
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wages are synonymous for disclosure purposes. Id.; see also
Kawakami I, 134 Hawaiʻi at 359, 341 P.3d at 565.
This court addressed that issue in Kawakami I. There, a
consumer sued Kahala Hotel under consumer protection statutes
(HRS §§ 480–2 (2008) and 480–13 (2008)) for a HRS § 481B-14
breach because the hotel’s non-disclosure “misled customers into
thinking that servers received the service charge in full as tip
income.” Kawakami I, 134 Hawaiʻi at 357, 341 P.3d at 563.
According to its collective bargaining agreement, the Kahala
Hotel distributed 85% of service charges to employees as tip
income and retained the remaining 15% as the “management’s
share.” Id. at 355, 341 P.3d at 561. Later the hotel
reclassified the management’s share to offset its wage
obligations. Id. The hotel did not disclose this practice to
consumers. Id. at 357, 341 P.3d at 563.
Looking to the legislative history, Kawakami I reasoned
that “despite the legislature’s use of the phrase, ‘wages and
tips’ in the statute, its subsequent insertion of ‘tip income’
was to clarify that the service charges must be distributed to
the employee as ‘tip income.’” Id. at 358, 341 P.3d at 564.
This court also concluded that the addition of “tip income”
reflected the legislature’s intent to ensure that service
charges are “distributed directly as ‘tips’ in a manner that
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protects consumers from being misled about the application of
moneys they pay as service charges.” Id.
Thus, Kawakami I held that the terms “tip income” and
“wages” are not interchangeable for HRS § 481B-14’s disclosure
purposes. Id. at 359, 341 P.3d at 565. When a hotel or
restaurant allocates part of the service charge for wages, that
is analogous to using the service charge to pay administrative
costs. See id. at 360, 341 P.3d at 566; see also Gurrobat, 133
Hawaiʻi at 17, 323 P.3d at 808 (a hotel is not entitled to retain
a portion of service charges to supplement the income of
managerial employees, who are not otherwise entitled to tip
income). Kawakami I was clear. The hotel or restaurant must
clearly disclose this practice so that a well-informed consumer
may choose to leave a tip in appreciation of the employees’ good
service. 134 Hawaiʻi at 357, 341 P.3d at 563.
Here, Mauna Kea injected ambiguity into its pre-2017
disclosures by grouping tips and wages. Grouping tips and wages
makes sense for tax and enforcement purposes. But that practice
is best left to tax filing and behind-the-scenes accounting.
In the consumer disclosure context, it creates confusion.
Consumers are hard pressed to decipher how much of the service
charge goes to tips and how much goes to wages. Plus, grouping
tips and wages prevents clear disclosure of how much of a
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service charge goes toward administrative costs, like the
employer’s wage obligations.
Reading Mauna Kea’s pre-2017 disclosures, consumers may
have assumed the service charge acted as a tip for the employee
when it actually covered wages. So they may not have tipped,
causing employees to lose out. This defeats HRS § 481B-14’s
dual purposes.
A new rule is needed to advance the legislature’s intent.
D. The U.S. District Court for the District of Hawaiʻi has applied this court’s understanding of the requirements of HRS § 481B-14 to assess disclosure sufficiency
HRS § 481B-14’s requirements are straightforward when (1)
all the money goes to tips, or (2) no money goes to tips. The
complicated situation, like in this case, happens when part of
the service charge goes to tips.
When all the money goes to tips, no disclosure is
necessary. See HRS § 481B-14.
When no service charge money goes to tips, the hotel or
restaurant must either (1) state that the service charge is not
a gratuity, or (2) disclose that the entire service charge is
used for some purpose unrelated to tipping employees. See id.
Stating that no part of the service charge goes to employee tips
complies with HRS § 481B-14. The hotel or restaurant just needs
to clearly notify customers that the service charge is not a
tip.
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But this court has not ruled on HRS § 481B-14’s
requirements when part of the service charge goes to tips.
Our state’s federal district court has. See Wadsworth v.
KSL Grand Wailea Resort, Inc., No. 08-00527 ACK-RLP, 2014 WL
6065875 (D. Haw. Nov. 12, 2014) (Wadsworth II).
We find Wadsworth II persuasive.
Like here, Wadsworth II involved a class action case.
There the plaintiff employees sued under HRS §§ 388–6, 388–10
(2015), and 388–11 (2015) leveling wage-related claims against
their employer hotels and restaurants. Id. at *1. The
employees alleged that the hotels “had a policy and practice of
retaining for themselves a portion of these service
charges . . . without disclosing to the Hotel’s customers that
the service charges are not remitted in full to the employees
who serve the food and beverages.” Id.
Looking to this court’s HRS § 481B-14 decisions, and noting
that “[c]larity and conspicuousness is a question of law,” the
district court crafted a rule to determine whether an employer
had satisfied the clear disclosure requirements. Id. at *4-*5.
The court reasoned that customers had enough information to make
an informed decision under HRS § 481B-14 when service charge
disclosures specified that “(1) the service charge was not a
gratuity, (2) the service charge was to be applied entirely to
administrative expenses, or (3) a certain amount or percentage
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of the service charge would be paid to the food and beverage
servers.” Id.
Wadsworth II then applied this rule to a series of
contested disclosures. Id. at *5-9. Two applications are
instructive.
First, from 2006-2009, the defendant hotel’s banquet event
orders included the following disclosure:
All food and beverage is subject to a 21% service charge and a 4.166% Hawaii State and Local Tax. Service charges include gratuities, taxes, and other hotel service charges.
Id. at *7 (emphasis added).
Wadsworth II found this disclosure deficient. Id. The
disclosure did not clearly inform consumers exactly how much of
the service charge went to servers as a gratuity. Id. Thus,
customers did not have enough information to guide their
gratuity decision-making. Id. This may have resulted in misled
customers and lost tips. Id. (citing Villon, 130 Hawaiʻi at 139-
40, 306 P.3d at 184-85). Both results – clueless consumers and
stiffed workers – flout HRS § 481B-14’s consumer and employee
protection purposes.
Second, in 2011, the hotel updated its room service
disclosures to contain the statement, “Gratuity Included!” Id.
at *9. Wadsworth II found this disclosure insufficient. “[A]
statement indicating that the service charge includes the
gratuity wholly fails to satisfy the requirements of § 481B–14.”
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Id. Disclosures like that “utterly fail[] to adequately apprise
customers what portion, if any, of the service charge is being
paid to service employees in lieu of a gratuity.” Id.
Because the service charges were not full gratuities, and
they did not go entirely to administrative expenses, the hotel’s
disclosures needed to specify what amount or percentage of the
service charge would be paid to the servers as tips. See id. at
*5. Since there were no numbers, the disclosures failed to
inform the consumers and protect the workers. See id. at *7,
*9.
The same reasoning applies to Mauna Kea’s 2010-2016
disclosures.
Here, Mauna Kea’s disclosures relate to the scenario where
some of the service charge ends up in the servers’ pockets.
Thus, Wadsworth II becomes instructive.
When a hotel or restaurant chooses to pool tips with other
expenses, HRS § 481B-14 requires specificity. Otherwise, a
disclosure is ambiguous, contradicting both the plain meaning of
“clearly disclose” and the purposes of the statute to inform
customers and protect tip-earning employees.
In Wadsworth II, the hotel disclosed that “[s]ervice
charges include gratuities, taxes, and other hotel service
charges.” Id. at *7. That language doesn’t work, the district
court reasoned. Id.
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Here, Mauna Kea’s pre-2017 disclosures read: “[W]e allocate
a portion of the service fee to our employees as tips or wages
and a portion of the service fee to pay for costs or expenses
other than wages and tips of employees.” The effect matches the
Wadsworth II disclosure. It fails to adequately apprise
customers that the service charge is not a tip. See Wadsworth
II, 2014 WL 6065875, at *7.
For consumers to be properly informed and for employees to
receive their well-earned tips, specificity is required.
Consumers need to know how much of the service charge actually
goes to tips for servers so they know whether and how much more
to tip.
It appears Mauna Kea understood that making this kind of
disclosure fulfills the law’s aim. Mauna Kea started making
detailed disclosures in early 2017, soon after Rodriguez filed
his complaint. For example, one updated disclosure reads:
All food and beverage functions are subject to a mandatory 22% surcharge, which consists of a 18.7% gratuity that is pooled and distributed to those F&B staffs servicing you and your function, and the remaining 3.3% is retained by the Hotel to cover non-itemized costs of the event (and not distributed as a tip or gratuity to the Hotel’s employees). . . . If you or your attendees wish to provide a tip to a specific server(s) or other employee(s) servicing you or your function, please feel free to do so.
This is sufficient disclosure under HRS § 481B–14. It
notifies consumers that part of the service charge is used for
purposes other than wages and tips of employees. And it
specifies the percentage of the service charge that goes toward
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tips. Customers are informed about how much of a tip has
already gone to servers, and there is no confusion that would
lead to servers getting short-changed. This satisfies HRS
§ 481B–14’s objective.
To ensure compliance with both HRS § 481B-14’s plain
meaning, and its dual purposes to avoid consumer confusion and
protect employee tips, we adopt a modified version of Wadsworth
II’s rule.
Thus, when the entire service charge is dispersed directly
to employees as tips, no disclosure is necessary.
When no part of the service charge is dispersed directly to
employees as tips, the employer may either (1) inform consumers
the service charge is not a gratuity, or (2) inform consumers
that the service charge is applied entirely to administrative
costs.
And when some, but not all, of the service charge goes
directly to employees as tips, the employer must inform
consumers the amount or percentage of the service charge that is
paid to food and beverage servers as tip income.
III.
We vacate the ICA’s January 9, 2025 judgment and affirm the
circuit court’s November 12, 2021 judgment. We remand to the
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circuit court for further proceedings consistent with this
opinion.
Brandee J.K. Faria /s/ Mark E. Recktenwald (Mateo Caballero on the briefs) for petitioner /s/ Sabrina S. McKenna
Richard M. Rand /s/ Todd W. Eddins (Kristi K. O’Heron on the briefs) /s/ Lisa M. Ginoza for respondents /s/ Vladimir P. Devens