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#Per Se Violated Labor Law With ‘Service Charge, ’ Inquiry Finds - The New York Times

A private event at Per Se, a restaurant with prices to match its opulent confines at the Time Warner Center at Columbus Circle, near the luxury skyscrapers often called Billionaires Row, is yet another level of exclusivity in a dining experience where Nova Scotia lobster coddled in butter joins a menu where foie gras is followed by caviar and truffles.

In this ultraluxury world, it can almost make sense that even though the restaurant embeds the gratuity for its staff in the cost of its $310-per-person dinner prix fixe, it also demands an extra charge for private dining.

But a 20 percent “service fee” for such events, like a fancy soiree for an elopement in the private dining room, was, for a time, not destined just for the waiters who rush Italian white truffles and other delicacies to the tables, an investigation by the New York State attorney general’s office found.

An agreement disclosed on Thursday revealed that the charge was misrepresented. The restaurant violated state labor law, according to Attorney General Eric T. Schneiderman. by portraying operational charges for private dining events as gratuities destined for employee wallets. To resolve the findings, Per Se will pay $500,000 to employees who were hurt by the violations. It also agreed to make it easier for employees to complain about labor violations, train staff members responsible for private dining events to understand the labor laws, and designate a compliance officer to monitor labor practices.

“Today’s agreement ensures that workers at Per Se will not continue to be cheated out of their hard-earned tips — tips that customers intended for them,” Mr. Schneiderman said in a statement. “And it reaffirms the right of satisfied restaurant-goers not to be misled about whether a ‘service charge’ is actually paid to workers as a tip, which the law requires.”

Tip distribution has proved problematic in the past at other high-profile restaurants in Manhattan. In 2012, for example, Del Posto, an Italian restaurant in Chelsea run by Mario Batali and Joe and Lidia Bastianich, agreed to several settlements. They included paying $1.15 million to 31 current and former employees who had complained of problems with tips and overtime, among other issues, and a second separate payment of $5.25 million, distributed to 1,100 workers across the several restaurants Mr. Batali owns.

The violations at Per Se, which lasted from January 2011 to September 2012, resulted from the language the restaurant used. Per Se called the fee a “service charge,” terminology that traditionally connotes a tip for employees. The restaurant also told some customers who inquired that the extra charge was a gratuity, the attorney general’s office said.

In fact, the agreement said, Per Se, which opened to great acclaim in 2004, run by the celebrated chef Thomas Keller. used the money “towards the operational revenue of the restaurant.” In doing so, it violated a state labor law enacted in January 2011 that bars restaurants from collecting mandatory service charges that are purported to be tips for service staff members, failing to explicitly state what it is for. Per Se was in noncompliance from then until it changed the language of its private dining agreements on its own in September 2012.

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In a statement on Thursday, the restaurant described the situation as “an unintentional oversight.”

“Per Se, unaware of a new state regulation, did not update the description of the operational charge in its private dining event agreement during a 21-month period in 2011 and 2012,” the statement said.

Others see it differently. D. Maimon Kirschenbaum, a lawyer for restaurant workers who has been involved in similar cases, says they are frequently about profit, not oversight.

“Per Se got the better end of two deals,” he said. “They got to take the 20 percent of the meal because customers are willing to pay, and they can just pay the standard wage to workers and pocket the rest.”

The average server’s salary at Per Se is $116,000 a year, including overtime and gratuities (tips over and above the bill are sometimes left), a spokeswoman for the restaurant, Iva Benson, said. Hourly wages range from about $16 to above $28, a leap beyond the practice at most restaurants of compensating workers with a lower hourly wage plus any tips they accrue. Those rates, Ms. Benson said, are possible because of the service-included system. She added that a portion of the 20 percent private dining fee went toward workers’ salaries.

“Our employees were never shortchanged, and no monies intended for employees were withheld,” Ms. Benson said. “Our employees are among the best compensated in the restaurant industry because they are the best in the business. The attorney general’s office’s own findings state that the charge was used in part to pay Per Se’s workers their industry-leading wages.”

Lauren Coroy, a server at the restaurant from 2005 to 2007, said she felt there was no issue in how Per Se compensated its staff.

“In my opinion, we made a lot of money for working in the service industry,” Ms. Coroy, who now lives in New Orleans, said. “I’m a teacher now, and I make a lot less.”

Noam Scheiber contributed reporting.

A version of this article appears in print on July 3, 2015, on page A19 of the New York edition with the headline: Luxury Restaurant Violated Labor Law With Service Fees, Attorney General Says. Order Reprints | Today's Paper | Subscribe