The U.S. District Court for the District of Massachusetts recently provided the first interpretation by a court of the term “service charge” as defined in Massachusetts General Laws ch. 149, § 152A (the Tip Statute). In DiFiore v. American Airlines, Inc., the District Court determined that a person other than an employer may be liable for failing to distribute a service charge and ordered a new trial for the limited purpose of determining whether a consumer would reasonably expect a $2 per bag charge for curbside check-in to be given to a skycap “in lieu of, or in addition to, a tip.”

In December 2006, ten skycaps, nine of whom were employed by independent contractor G2 Secure Staff, filed a lawsuit against American challenging American’s retention of the curbside fee, asserting both common law and Tip Statute claims. After an eleven-day trial, a jury returned a verdict of more than $325,000 in favor of most of the skycaps. American moved for a new trial, arguing that the statutory definition of “service charge” only includes charges levied by an employer and that the airline therefore could not be liable for the claims of the skycaps employed by G2. Plaintiffs countered that employers “or other persons” can be liable under the three other sections of the Tip Statute and that the absence of “or other persons” in this provision was a legislative oversight.

The Court agreed with American that “or other person” cannot be read into the definition of service charge, but found that a person other than an employer can still be liable under the statute. The Court reached this conclusion based on its determination that the definition encompasses two different kinds of fees: (1) “a fee charged by an employer to a patron in lieu of a tip” or (2) “a fee that a patron or other consumer would reasonably expect to be given to” the protected employee classes “in lieu of, or in addition to, a tip.”

According to the Court, because American was not the employer of the G2 skycaps, the airline could be liable to them only if the baggage fee falls within the second prong of the definition. Because the jury instructions did not distinguish between the two types of fees, and the jury rendered a general verdict that did not specify the basis for liability, a new trial is necessary to determine whether a jury would find that the fee at issue satisfies this portion of the definition.

As the first published decision that addresses whether a nonemployer can be liable for retaining “service charges” under the Tip Statute, this decision could have far-reaching implications for the service industry. The District Court, however, has stated that it will certify questions regarding its interpretation to the SJC for a definitive ruling. Thus, interpretation of this aspect of the statute remains an unsettled area of law.