Tip Jaw

January 7, 2008 2:59 PM

My friend is a server at a privately-owned restaurant, and she received a big tip from a patron ($40 on a $100 bill). However, it turns out days later that the card used was stolen, and now the restaurant owners have asked for her to return the tip money. Do they have any legal ground to do so?

This is in California. She didn't know the patron, nor did she know the card was a stolen item.

posted by Mach3avelli to law & government (33 answers total)

if anyone deserves the money, it's the person whose card was stolen. she should not return it to her employer unless they are planning to reimburse the owner.

i don't know what she is legally obligated to do, however.
posted by thinkingwoman at 3:03 PM on January 7, 2008

If she had been tipped with a phony $20 bill, would she expect the owners to replace it with a real $20?

Personally, I'd write it off and be upset with the jackass who used a stolen credit card, not the restaurant owners who were also ripped off.
posted by indyz at 3:07 PM on January 7, 2008

and now the restaurant owners have asked for her to return the tip money.

Return it where?
posted by Brandon Blatcher at 3:14 PM on January 7, 2008

The credit card company's not going to pay the charge, so the restaurant is out the $100 as well as the $40. She's really not giving the restaurant the money so much as not taking it from them.
posted by still_wears_a_hat at 3:16 PM on January 7, 2008 [2 favorites]

Irrespective of the law, giving the money back is the right thing to do.
posted by Steven C. Den Beste at 3:27 PM on January 7, 2008 [1 favorite]

If she had been tipped with a phony $20 bill, would she expect the owners to replace it with a real $20?

Another analogy is that the restaurant pays her salary with a phony $20 bill they received from someone else, and then won't correct the problem when it's discovered. "Hey, we're out 20 bucks, too, so we can't give you 20 bucks we don't have."

Yeah, umm, bullshit. The restaurant is deliberately paying servers a low salary (i.e. minimum wage) knowing that it's made up for by tips. Tips are salary. If she had no way of knowing the card was stolen (i.e. she couldn't possibly be responsible for the restaurant's loss) ... bummer.
posted by Cool Papa Bell at 3:28 PM on January 7, 2008 [1 favorite]

However, it turns out days later that the card used was stolen...

BTW, credit card companies usually pay the charges on stolen credit cards if the charge was created before the card was reported stolen.
posted by Cool Papa Bell at 3:30 PM on January 7, 2008

My analogy isn't great, but I think it holds. Servers aren't paid tips by the restaurant, the business just acts as an intermediary in the case of credit cards. Since the money has effectively vanished, the restaurant has nothing to pass on. It sucks, but it is what it is.
posted by indyz at 3:34 PM on January 7, 2008

indyz, your analogy doesn't work because the OP got cash the night of the tip, so the restaurant IS asking her to pay them out of her pocket. I'd say no way to them. If the card was indeed stolen, but the credit card company approved the charge, the restaurant is not out any money. I suspect there is more to the story from the restaurant's side (like the card wasn't actually reported stolen, it's a situation where someone had verbal auth to spend $40 on dad's card, but went overboard, etc etc.)
posted by nomisxid at 3:39 PM on January 7, 2008

Servers aren't paid tips by the restaurant, the business just acts as an intermediary in the case of credit cards.

Yes and no. Most restaurants that don't have a cash register at the front (meaning, most nice restaurants) require the servers to carry a "bank" of small bills to make change and hold a running total of invoices (checks). At the end of the night, the server settles up with the restaurant, handing the restaurant a set of checks and sufficient cash and credit card receipts to pay the sub-total amounts on the checks (the money the restaurant has charged the customer).

If there are more charges by credit card than cash (often the case), the restaurant reaches into its till and pays the difference to the server. The restaurant and the server are now "even" with regard to sales and tips, less a percentage of total sales (not tips) mandated by the restaurant that the server pays to other employees (e.g. bartenders).

So, yes, servers (and bartenders) are very often "paid" their tips by the restaurant, either directly to balance the accounts between the sales and the server's personal bank, or through a mandated shared tipping procedure.
posted by Cool Papa Bell at 3:44 PM on January 7, 2008

Where does it say the OP's friend has already received the money?

In my experience, tips from credit cards are paid out with the paycheck for that period. Obviously things may be different with the friend. I was working under the assumption that the friend hadn't received the money yet, but even still I think the decent thing to do is give the money back (I have worked for tips, and I would give the money back).
posted by indyz at 3:45 PM on January 7, 2008

Wow, there have been so many tip questions the last couple of days. I assume the $40 came off the card as well?

The merchant should not be liable for a fraudulent card-present transaction if they (and this means your friend) followed the card's rules. If this is the case, then they shouldn't be out any money. If your friend violated the card's rules, by, for example, not checking the signature on the slip against the card, then the money won't get paid.
posted by grouse at 3:46 PM on January 7, 2008 [1 favorite]

It seems that if the tip was put on the card, if the restaurant doesn't get the money (which depends on how the credit card fraud policy works), then she won't get the money. Tips don't come from employers, they come from patrons. She got stiffed, just like the restaurant. Sucks, but it happens.

Unless the credit card fraud department rules that the restaurant gets the money. In which case the restaurant gets their hundred, and she gets her forty.

If the patron gave her cash (unlikely, but unstated) then there is no reason in hell why she should give it "back," as the person to give it back to is long gone.
posted by iguanapolitico at 3:54 PM on January 7, 2008

It seems really early for them to be asking for money back. They may have received a notice of chargeback and been asked to provide a copy of the sales slip, but I doubt that the credit card company has made a final decision yet on who's is responsible. Have her ask if the credit card company is still in the investigating stage? She can tell them she doesn't feel she should return the tip until/unless the restaurant gets a charge from the credit card company.

Also, she can at least make an argument that she served the customers and should get some tip money. Perhaps $15.00 which would have been the expected minimum for a $100.00 check, and she could return the other $25.00.
posted by saffry at 4:25 PM on January 7, 2008

Cardthief paid the restaurant for waitress's services, restaurant paid her for them later. She keeps the dough.

Credit card tips are usually given out the next day, so clearly the restaurant wouldn't know by the time they gave it to her that it was a stolen card. Regardless, it is up to the restaurant to cover its own ass against fraud, and if it pays her before it can do that, it's not her problem.

Having worked in a few restaurants, I'm SO not surprised they're asking her for the money back. Doesn't mean she has to give it.
posted by hermitosis at 4:27 PM on January 7, 2008

It probably goes without saying, but regardless of the legality of demanding the $40 from your friend, they might fire her if she doesn't hand it over.
posted by grouse at 4:37 PM on January 7, 2008

The criminal never had ownership the property and therefore could not possibly have passed ownership of the monies to the waiter. Period end of story. If this were the case, people could rob banks and then "gift" the money to their mothers.
posted by Mr_Crazyhorse at 4:52 PM on January 7, 2008

Mr_Crazyhorse: One of the reasons a merchant pays a percentage of their credit card transactions to their bank is a certain amount of fraud protection. In this case, the merchant stands to keep the entire $140 if the credit card rules in their favor. Are you saying they also deserve an extra $40 from the waitress? Period end of story?
posted by grouse at 4:57 PM on January 7, 2008 [1 favorite]

Call me Miss Grinch; I'm a pretty compassionate person but I don't see why the restaurant is expected to be out *$140* (lost $100 plus $40 to waitress) while the waitress makes $40. They were stiffed. Nobody gets paid. Everybody loses except the card thief scumbag. (Unless, again, the credit card company pays the restaurant, in which case both restaurant and waitress would be paid.)

Otherwise, as Mr_Crazyhorse said on preview, it sounds like a nice little scam where all sorts of waitresses' accomplices could tip big with stolen cards.
posted by iguanapolitico at 4:58 PM on January 7, 2008

She got stiffed, just like the restaurant. Sucks, but it happens.

I sort of agree with this in theory, but in practice (depending on the type of establishment) the waitstaff/management relationship is often more of the "every man for himself" type. I used to wait tables at a few rowdy sports-bar-type places, and it was standard procedure that if a waitress got stiffed by a walkout, she was expected to eat the full bill - the attitude from management wasn't "hey, we both got stiffed."

From my perspective, the server in question did her part and now it's between the restaurant and the credit card company, especially since the server likely does not have (a) the leeway to request that customers pay her wages in cash and/or (b) the standing to negotiate with the credit card company.
posted by lalex at 4:58 PM on January 7, 2008

@grouse

the merchant gets fraud protection? that's news to me. the only fraud protection is for the cardholder, not the merchant.

I don't think the CC company is going to rule in the merchant's favor if the card was REPORTED STOLEN. the merchant is the victim, the fraud protection is for the customer who got their card stolen.
posted by Mr_Crazyhorse at 5:03 PM on January 7, 2008

I don't think the CC company is going to rule in the merchant's favor if the card was REPORTED STOLEN.

If the card had been reported stolen, and the card issuer neglected to mention this when the merchant asked for authorization, then it would be the card issuer who was negligent, not the merchant.
posted by grouse at 5:11 PM on January 7, 2008

She got stiffed, just like the restaurant. Sucks, but it happens.

I sort of agree with this in theory, but in practice (depending on the type of establishment) the waitstaff/management relationship is often more of the "every man for himself" type. I used to wait tables at a few rowdy sports-bar-type places, and it was standard procedure that if a waitress got stiffed by a walkout, she was expected to eat the full bill - the attitude from management wasn't "hey, we both got stiffed."

This is one reason why I don't think the waitress gets the tip in this scenario. The restaurant is not going to pay a waitress (thereby losing even more money) for getting ripped off by a patron. Doesn't matter whose fault it was or wasn't.
posted by iguanapolitico at 5:12 PM on January 7, 2008

Just for your future information, Visa says:

• In face-to-face transactions, merchants are not liable for fraud when the transaction is properly authenticated. This represents the vast majority of Visa transactions.
• Merchants are only liable for fraud in cases where the card is not present at the point of purchase, such as over the phone, in the mail, or on the Internet.

posted by grouse at 5:19 PM on January 7, 2008

and what does the contract between the merchant and the processor say?
posted by Mr_Crazyhorse at 6:32 PM on January 7, 2008

Where does it say the OP's friend has already received the money?

In my experience, tips from credit cards are paid out with the paycheck for that period.

Every restaurant I worked at I collected my charge tips that night it came out of my receipts (of course YMMV).
posted by bitdamaged at 6:59 PM on January 7, 2008 [1 favorite]

and what does the contract between the merchant and the processor say?

I don't know, but it should follow the rules set down by Visa/MasterCard. I have seen several of these agreements and have yet to see one that doesn't, or that makes the merchant liable for the negligence of the payment processor. Anyway, this is getting way off-topic. My point is that it's not yet certain that the restaurant will not get paid for the transaction, so it's premature for them to ask for the money back.
posted by grouse at 7:04 PM on January 7, 2008

If the card was presented and authenticated then the restaurant will be paid. In that scenario the waitress keeps the tip.

There does seem to something fishy in this story. Is it possible the restaurant has had problems with jacking up tips on the receipts and there is a problem with the credit card company for that? Perhaps the user is disputing the amount of the tip? I don't know, but something seems off in this story.

As it's presented, as long as the card passed authentication the waitress should keep her tip. Oh, and I must of waited tables in the same places as lalex. It was "every man for himself" in the event of a stiffed bill.
posted by 26.2 at 7:32 PM on January 7, 2008

saffry and grouse have it - until there's a verdict on whether or not the restaurant eats the charge, your friend should hold onto the money. And since this premature move of their comes off as just a little shady to me, I'd go on to saw she ought to see the decision in writing if she's asked to give the money back. Cuz if the restaurant gets the charge covered by the credit card company, then they've made another $40 on top of the $100.
posted by EatTheWeak at 7:38 PM on January 7, 2008

saw = say. oy.
posted by EatTheWeak at 7:39 PM on January 7, 2008

I owned a small bar and grill several years ago. We had our regulars of course, knew them by name.

Credit card company sends me a letter that about 6 months of charges and tips (approx $600) were to be charged back to my account because of fraudulent use of a credit card. One of my "regulars" was using his elderly father's card. The regular was a 'Junior", names matched when we checked ID, transactions was properly authorized by cc company, I had signed receipts.

I had made my wait staff aware of the pending charge backs, they would have to pay their tip portion back to me if I lost the appeal. Luckily, I won. We were all happy, except for the scum bag.

She would have to pay back the tip. Maybe she could arrange to pay it back in installments?
posted by JujuB at 11:02 PM on January 7, 2008

I join the 'the merchant will not be out any money' chorus - generally merchants still get paid in this circumstance (except in case of negligence or 'card not present' transactions).

If the employer isn't loosing money (and they shouldn't be if it went down as presented) then she shouldn't be either.
posted by sycophant at 2:49 AM on January 8, 2008

The U.S. Department of Labor Field Operations Handbook §30d05(d) says:

The employer may recover from a tipped employee the tip amount stated on the uncollected credit card slip if the tip amount has been paid to the tipped employee

It goes on to reiterate that this wouldn't apply if it drove the employee's compensation below the minimum wage for that workweek.
posted by grouse at 5:38 PM on January 13, 2008