Service Charge Cases
In 2007, Hadsell Stormer & Renick, LLP brought lawsuits against five hotels located adjacent to the Los Angeles International Airport (LAX) in order to force the hotels to pay its employees Service Charges collected from customers for services provide by the employees. The class-action lawsuits stemmed from the hotels' violations of the City of Los Angeles Service Charge Ordinance intended to improve the working conditions of employees working at LAX hotels. The Ordinance focused on the problem of hotel's adding "service charges" of 15 to 22% to customer bills, particularly for room service and banquets and failing to tell customers that none of the charge was going to the employees who provided the service. The charges appeared on the bill much like mandatory gratuities for large restaurant parties and patrons were not informed of the charge's purpose. As a result, customers unsurprisingly misidentified the "service charge" as a gratuity and hotel workers responsible for the services experienced significant reductions in income. The Ordinance addressed the problem by requiring hotels to pass the service charges on to the workers who performed the service, or else clearly and unambiguously advise customers that the charge was not being paid to the employees.
Some of the Century Boulevard hotels sought to skirt the Ordinance by relabeling the charge as a "facilities charge." But because the charge was included at the bottom of the check, ranged from 15-22%, and appeared to be a mandatory gratuity, customers continued to believe the charge was being passed on to the employees. In court, the hotels challenged the Ordinance, claiming that the City of Los Angeles lacked the authority to regulate this issue. The trial court accepted their argument and dismissed the lawsuits. On review, the court of appeal disagreed and upheld the validity and enforceability of the ordinance. As a result of the ruling, hundreds of employees at the five hotels were able to proceed with their lawsuits to collect all service charges imposed on customers by the hotels since 2007.
After years more of litigation, each of the five lawsuits ultimately settled. The employees at Marriott LAX Hotel, Renaissance LAX Hotel, Four Points Sheraton LAX Hotel, Radisson LAX Hotel, and Hilton LAX Hotel were able to reach agreements with each hotel. The settlements totaled over $9 million and represent an enormous victory for Los Angeles service workers. The settlement amount for the class actions against Marriott LAX and Renaissance Montura Hotel Los Angeles (January 1, 2007 through May 15, 2012) totaled $4.5 million; the settlement with Four Points Sheraton LAX (January 1, 2007 through April 8, 2008) was $390,000; the settlement with Radisson LAX Hotel (January 1, 2007 through November 15, 2007) was $200,000; and the settlement with Hilton Los Angeles Airport (January 1, 2007 through December 3, 2014) was $4 million. All of the settlements were approved by the court and class members who submitted claims have been paid.