Most visitors to Hawaii, and residents too, are glad to leave a tip when they know it goes directly to the servers and bartenders who help them. Guests recognize that many in Hawaii’s hospitality industry work two or even three jobs to keep living here, and tipping is one small way to support them.
What few realized until now is that part of those tips was being quietly skimmed off through mandatory service charges. Hawaii’s Supreme Court has just ruled that the practice was not being disclosed clearly enough, and what has long been disputed behind the scenes is now out in the open view.
In a ruling with major implications for both visitors and staff, the justices sided with more than 100 hotel workers who argued that their employers had misled guests and shortchanged staff by disguising where those charges actually went.
The decision validates years of complaints from workers in Hawaii’s hospitality industry and shines a bright light on one of the least transparent practices travelers face when visiting Hawaii.
What the law really says.
Hawaii Revised Statutes 481B-14 is simple. When a hotel or restaurant adds a service charge to a food or beverage bill, it must either pay that charge directly to employees as tip income or clearly inform the customer in plain language how the money is being used. The word “clearly” is what the case turned on, and the Court concluded that hotels failed to meet that standard.
For years, hotels and resorts have used disclaimers stating, “A portion of the service fee may be distributed to employees as wages or tips.” That wording never told a guest if workers were getting twenty percent, ten percent, or nothing at all. As the Court noted in its opinion, such phrasing left the meaning to any consumer’s guess, and that was never the intent of the law.
How the Hawaii hotel tip case began.
The fight started with banquets at the Mauna Kea Beach Hotel on Hawaii Island and at other Prince Resorts properties. Guests were automatically charged a twenty percent service fee and believed it was a well-earned gratuity for the staff who worked the event.
In truth, only part of that money, and sometimes very little, ever made its way to the employees. The hotels kept the rest for their own internal expenses, never explaining that to the people paying the bill.
One banquet server, Reneldo Rodriguez, decided to challenge that system. In 2016, he filed a class-action lawsuit on behalf of more than one hundred employees. The case traveled from the First Circuit Court to the Intermediate Court of Appeals and ultimately to the Hawaii Supreme Court.
After nearly a decade of arguments and reversals, the justices issued their rebuke. Language that says “a portion” is shared, they ruled, does not meet the standard of being clear and does not satisfy Hawaii law. For Rodriguez and others who came forward, the ruling is not just a legal victory; it is also a testament to their courage. It is recognition of years of lost income and an acknowledgment that guests were misled.
Why this matters to visitors.
Service charges in Hawaii hotels typically range from 18 to 22 percent, which can add hundreds of dollars to a banquet, restaurant, or wedding bill. Until now, guests had no way of knowing how much of that money actually reached the staff.
Travelers already pay some of the highest room rates in the country, with nightly averages often exceeding $500. When another twenty percent fee appears on a dining or event bill, most guests assume they have taken care of the people who served them. In reality, many left workers with far less and walked away thinking the matter was settled.
The Court underscored the problem. Associate Justice Todd Eddins wrote that the law was created to both inform consumers and ensure that service workers are properly compensated. Without clarity, guests feel misled and employees lose income they reasonably expect.
He captured the issue in one striking line: “Does a portion of the service charge mean nearly all of it? Or almost none of it? It’s any consumer’s guess.”
Hawaii hotels forced to change.
The Court noted that some hotels have already updated their disclosures. By 2017, specific banquet menus and contracts began to specify exact percentages. One example showed that 18.7 percent of a 22 percent service charge was allocated to employees, with 3.3 percent retained by the hotel. That kind of transparency, the Court said, meets the legal standard because it removes ambiguity about how much of the money is going where.
The fact that hotels only clarified their practices once lawsuits were filed tells its own story. For years, the practice of pocketing a slice of service charges was business as usual, and it was rarely questioned. Guests assumed they had done right by the staff, while employees quietly shouldered the loss. The lawsuit forced a change that the Hawaii hotel industry was unwilling to embrace voluntarily.
The bigger picture of hidden fees.
This ruling comes as hidden or misleading charges are being challenged across the travel industry. Airlines have been pushed to reveal baggage and seat charges upfront. Resorts across Waikiki and Wailea continue to add nightly fees for amenities many guests never use. Restaurants in Hawaii also fall under this law when they add service charges, and they, too, must clearly state whether the money is distributed to staff or retained by management. With this decision, Hawaii’s hotels and restaurants alike are being forced to open the books on charges that were once left vague.
For Hawaii, where visitors already complain of feeling nickeled and dimed, the timing is critical. The islands rely on both the goodwill of travelers and the fair treatment of workers, and anything that undermines either one risks damaging the long-term health of tourism. With visitor costs already at record highs, any practice that makes guests feel tricked only adds to the sense that Hawaii has become too expensive and too complicated.
What Hawaii travelers can do.
The Court’s decision does not ban service charges on guest bills, but it does require that they be disclosed in an unmistakably clear way. For visitors, there are a few practical lessons to consider. It is reasonable to ask a hotel or restaurant to explain any service charges on your bill. If you are attending a banquet, wedding, or other large-scale event, review the contract language to understand how the service charge is distributed. Many guests also choose to leave cash tips directly with the staff to ensure the money reaches them.
What readers are likely to say.
Reactions to this ruling are likely to be strong. Many travelers will recall seeing service charges on their bills and believing they had tipped generously, only to discover now that the staff may have received little or nothing from it. Some will say they feel duped, while others will likely decide to start leaving cash tips directly with employees to ensure they reach the right hands.
For hotel workers, the mood is very different. There is relief and vindication after years of quietly complaining about money that should have been theirs but was instead kept by management.
Without the courts, they had little power to change the practice. This case does more than acknowledge their loss. It forces the industry to come clean, and in a state that depends so heavily on both tourism and the people who deliver the experience, it marks a shift that could reshape expectations for years to come.
What do you consider fair? We welcome your comments.
Lead photo credit: Beat of Hawaii at Ala Wai Small Boat Harbor in Waikiki.
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I was at a restaurant in Waikiki and gave a cash tip to the waitress. She said she had to put it in the pot for all the staff to share. She wasn’t allowed to keep it for herself or she could be fired. It stinks when the restaurant owner charges you heaps for the meal, charges you for the service and pays the employees poorly. Win win for them, the rest of us are ripped off.
It is disgusting how management has misled guests, taking advantage of their sympathies for the workers for their own profit. They knew what they were doing all along.
The next law that should be passed is that automatic “gratuity” should be optional at the guest’s discretion. It can be considered a convenience to include gratuity, but not if it is by force. A guest should be able to optionally hand the gratuity to the workers, and/or specify exactly how much goes to the workers if they choose.
We stayed in Coronado recently at a spendy hotel. They had doubled their rates since last time we visited. Then on top of it, there was a QR code in the room for tipping the housekeeper. No thanks! I bought a nice card addressed it to the housekeeper and left my tip in cash. I received a sweet note back. We aren’t going there again, they are out of control. I hope future guests leave cash. What is going on anyway.
What do you expect from Corporate weasels, nice guys that play fair?
Nope, they have bean counters who figure out ways to line their pockets at the expense of front line workers, or customers.
No respect, no honor, just Me, Me, Me!
Interestingly, it’s been over 10 years. The court system and the attorney’s time are spent so they can continue to generate fees. The system is broken on so many levels. Many crooks are profiting from this corruption. It does not just start at the hotel level; everything that touches corruption is broken. Just think- Litigators are taking a lifetime career playing with the paper.
We witnessed another tipping scam on a recent visit. We always leave a $5 tip for our housekeeper when we go out for the day. One day, we reached the elevator and realized that we forgot something. So we walked back to the room and saw the housekeeping supervisor leave our room with her clipboard. We had seen her on other days, going down the hall and knocking on doors. Supposedly, she was ensuring that the rooms were vacant so that the housekeeper can enter. When we entered our room, the tip was gone. So the supervisor was going around and harvesting all the tips before the housekeepers entered, leaving them nothing while the guests thought they had tipped the people actually cleaning their rooms. We reported this to the management and they were shocked and apologized. The promised to take action. I recommend leaving your cash tip under a pillow so that the housekeeper finds it while making the bed and include a note that says “Thank you!” so they know it’s a tip.
When a room or hall is booked for an event, the customer has already paid a service fee. It is deceptive and a bit fraudulent to charge an additional service fee where the entire amount of the service fee is not paid to the staff working the event.
Why not call it what it is, “A fee designed to deceive clients into scheduling an event/room/dinner for a lower initial price only to be charged (extras) for additional profit”.
Full disclosure should be required up front!
I’m Canadian and almost always tried to pay in cash, rarely charging to the room. I tried to make sure the servers hopefully got their fair share. Here unfortunately I’ve seen the same practice used by owners here. Never liked it, and voiced my complains about the practice. Glad, so far it’s working for them!
Customers were duped and so was the staff. The Supreme Court should just banned these scammy service fees. It shouldn’t have taken 10 years. That’s ridiculous.
Cruise Lines are notorious for doing this. The mandatory “prepaid gratuities” they add to your account doesn’t completely go to the service staff onboard.
This seems no different from the fake unlicensed, unregistered groups that took donations from whole hearted caring tourists and ran with the money for the Lahaina fire victims. Now tourist tips are skimmed by hotels and the workers don’t even get the amount that they rightfully have a right to. The trust factor IMO of Hawaii is Null, Dishonest, Disrespectful, and Crooked. Hawaii demands respect from tourists but give no respect even to it’s own locals. Do you really then think they give a darn about any tourist? If you can’t trust Hawaii then why would you ever go there?
Wake up. It’s not “Hawaii” that is ripping visitors off. It’s the hotels and their corporate multinational overlords. Hawaii is just the state where it happens.
You have to blame the locals that work there too. This has been a problem that has been going on for years not suddenly. Again trust is broken even between local residents and the hotel managers. The hotel managers let this happen and where is the Aloha Spirit there? What it’s not a wrong doing or crime as long as you don’t get caught. Really!!!! Where is one’s self respect and honesty in the position to serve the tourist?
I’d like to see every hotel manager made to undergo this grift & chicanery: whether they go get coffee, get an oil change, buy new clothes or a plane ticket ? Slap on another automatic 40+ percent (service fee + resort fee). It’ll stop quick.
Service charges hidden fees ..laundry fees …housekeeping fees… This is all just a scam to hold up people. Those fees are what we pay to have a room, it is their job to clean the room… They are in the hospitality business. They are supposed to provide a clean room. It’s their job, it’s just over the top.These service charges, and there has got to be some laws to stop this craziness
Can’t understand why it took a decade and one employee’s efforts to bring this to a decision. Where were the all-powerful Unions? What did they do to protect their members? If I were a member affected by this, I’d vote to decertify
So very happy to hear these loyal hard working employees had their day in court and won! A wonderful story. Mahalos 🌺🤙🏻
First, resort/hotel fees added to your nightly rate are a complete scam with no underlying costs to support the fee. They should be illegal. Greed play by owners. Management companies go along because they get a percentage of the fee.
Second, service fees in banquets used to be distributed among most of the people associated with the selling and servicing of catering events. No money went to the hotel. Banquet servers received the lions share of the service charge and were among the highest paid employees, on a per hour basis, in the hotels.
Not sure whether you remember the time when you had to pay for wifi, access to the gym etc? That was before resort fees.
If the fee provides something of value – eg chairs on the beach, shuttle to the surrounding area, gym, wifi, bottled water daily or cultural/ educational activities at the hotel, there is some justification. Charging $50 per night and giving me free toll-free calls only is a rip-off.
Regarding Service fees – the SC clarified the language of the law. Just wondering why it took 10 years as the law seemed obvious to any reasonable person. The ruling itself will not put more money in the pocket of staff – it just will make the distribution more transparent
What is a “service charge”? if any of it goes to the employer, that portion should be zeroed out. The amount listed for the service is it, you don’t get to add to it. Then the server should get all of it. Then my tip is based on the difference between the service charge and what I would otherwise would have left. Remember, TIP stands for To Insure Promptness. It isn’t automatic.
BOH did a story on a restaurant on Kauai that in order to get a table for dinner you were mandated to be charged 15% of your total dinner bill as a I think reservation fee, table fee, when you dined inside. When the restaurants then other hotels started charging daily fee’s for use of their pool, restaurant, and visitor bar entrance fee. These hidden fee’s rapidly become unexpected charges as the hotels are surely getting to operate IMO like LAS Vegas.
Carry cash and leave cash tip. I hate bills that have gratuity automatically added in. Don’t trust management as far as I can throw them.
A lot of us are recommending handing cash to employees, which is a good idea. But you still get stuck with the service fee, right? This is so bad. And the ‘no tax on tips’ thing is not permanent, it expires in 2028.
All these fees and special charges are confusing and irritating.
Ok, so now they have to disclose it…not sure what language is going to be used to inform people. Also, it’s not clear that this will change the behavior of these hotels.
I learned a long time ago to give any tips directly to the employees in cash instead of adding to my credit card. It is pretty damn sad that jot only have the citizens/employees been short changed by the state and county governments only to find out that their employers were also screwing them over, too!
I agree whole heartedly. Don’t like places that automatically charge gratuity or svc fee. Went to a place that had a v fee and spelled it out that a percentage went to head chef.
Fair to me is cash, handed directly to a hard working person who has done their best to make your trip more pleasant with the Aloha Spirit. Especially now that tips (for the most part)are no longer taxed.
best Regards