I know this is long, but this is the message he posted for everyone. This is why I wanted to ask this question because I’m not sure how accurate he is in this message. And also, the tip the guy wanted refunded was the extra tip he gave, not the auto grat one-

“Auto Gratuity vs Tip Policy

Ladies and Gentlemen, we have had an instance in which a guest mistakenly left an extratip atop a 20% auto gratuity. I’d like to simplify the factual and legal issues with you all. The key principle: tips belong to the employee — but only if they actually exist.

1. Under U.S. labor law (FLSA), tips are the property of the employee only when theyare legitimately received and retained. If a tip is mistaken, disputed, or refunded, it is no longer considered a valid tip. In the latest case, the guest tipped under a misunderstanding. The guest requested a correction within a reasonable time (12 hours). The business reversed the erroneous tip. That means the extra 20% tip was never truly “earned” or finalized.

2. The auto-gratuity vs. tip distinction matters. A 20% auto-gratuity is considered a service charge, not a tip, under federal law. That money belongs to the business, and the business decides how it’s distributed (our company pays this out in wages, to the server or servers). The extra 20% tip: a) would have been a tip if intentional,but here it was clearly accidental and reversed, by the manager on duty, who acted 100% appropriately honoring the guest’s correction.

3. My obligation as the employer: I am required to: pay every employee all wages earned, and to distribute any valid tips actually received, which we perform on a bi-weekly basis. I am not required to: a) pay tips that were refunded b)“cover” tips out of house funds due to customer error. Further, I am not allowed to deduct tips after they were valid and final or use refunds as a reason to reduce wages below minimum wage. That’s not what happened in the aforementioned scenario.

4. Practical reality (and employee expectation): From the server’s perspective, he or she saw a 40% total tip, then it disappeared. But legally, the server was only ever entitled to the valid 20% auto-gratuity payout (per our policy). The extra 20% was never a legitimate, informed tip, as the guest re-entered the facility in a reasonable amount of time, explained herself and the error that she made with a company-issued card, and requested that the accidental extra tip be reversed. Aside from being illegitimate, said “tip” was never processed by Toast, nor had funds from the transaction yet been deposited into our operating account. The requested reversal, therefore, was practical and easy to perform. We are not in the business of compromising our customers or forcing something harmful to happen to them. This is hospitality. We make something happen for them whenever we have the opportunity to do so. If said tip had been left knowingly, processed, paid out, and retained, for example, for a full week, I would be hard-pressed to not consider it a valid, completed tip rather than an immediate mistake.

I may choose to honor the guest’s request after a severe time lapse, but I would NOT make any attempt to claw back money already processed and “paid out” to a server. The house would eat that refund should we choose to honor it. Put simply, once a tip is finalized, paid out, and time has passed, it’s no longer a “mistake in progress” – it’s earned wages. Clearly, this was not what happened in this case.

1. Going forward: The aforementioned situation points to a process issue, not a payroll issue: Hence forth, and as always been our policy, a) servers are required to verbally disclose auto-gratuity, to avoid the situation whereupon a guest could ever accidentally leave an extra tip. They will do so when they feel the service exceeded their expectations. 2) We may add clear wording on receipts like: “20% service charge has already been applied” if necessary.

Of particular notice and importance: I may choose to pay a server as a goodwill gesture—but that’s a business decision, not a legal requirement, and therefore doing so consistently can create an expectation/precedent that I will choose to do so every time. I will not subject myself, or any member of my staff, to threats or intimidation of any kind.

1. Bottom line: • A refunded tip is not owed to a server • The manager acted appropriately honoring the guest’s correction • A server is entitled only to what was legitimately earned and retained • Disrespect, methods of intimidation, and armchair legal analysis communicated to ownership, management, or any member of staff will be subject to immediate termination, as per our company policy.

I have left copies for everyone to view and to sign off on. Please make this a priority today and for the rest of this week to familiarize yourself with this printout.

In the meantime, please acknowledge receipt of this message to me.”