Rodriguez v. Mauna Kea Resort LLC: The New Requirement to State the Exact Portion of a Service Charge Paid as Tip Income

Introduction

Rodriguez v. Mauna Kea Resort LLC, 155 Haw. 223 (Haw. 2025), marks the first time the Supreme Court of Hawaiʻi has squarely decided what a hotel or restaurant must say when less than 100 % of a mandatory service charge is passed on to service employees. Until this decision, earlier cases merely held that some disclosure was necessary if the charge was retained in whole or in part; none said how specific that disclosure needed to be. The Court now answers that question: if any portion of a service charge is withheld, the establishment must affirmatively state the amount or percentage of the charge that will reach the servers as tip income.

The litigation was brought by banquet server Reneldo Rodriguez on behalf of a class of more than 100 food-and-beverage employees against Mauna Kea Resort LLC, Hawaiʻi Prince Hotel Waikiki LLC, and Prince Resorts Hawaiʻi, Inc. (“Mauna Kea”). Rodriguez alleged that Mauna Kea collected a 20–23 % “service charge” but, from 2010–2016, kept part of that money without clearly telling consumers it was not a tip. The circuit court granted summary judgment for Rodriguez; the Intermediate Court of Appeals (ICA) reversed; the Supreme Court granted certiorari and, in this opinion by Justice Eddins, reinstated the trial court’s ruling and announced the new disclosure rule.

Summary of the Judgment

• The ICA’s decision was vacated; the circuit court’s summary judgment in favor of Rodriguez was reinstated.
• The Court held that simply parroting the statutory phrase “a portion of the service charge is used for costs or expenses other than wages and tips” is insufficient.
• New rule: Whenever a service charge is partially distributed as tip income, the business must “inform consumers the amount or percentage of the service charge that is paid to food and beverage servers.”
• The Court adopted and refined the federal district court’s three-part test in Wadsworth II.

Analysis

Precedents Cited and Their Influence

• Davis v. Four Seasons Hotel (2010) – confirmed that lack of disclosure violates HRS § 481B-14.
• Villon v. Marriott (2013) – treated “tip income” and “wages or tips” synonymously for enforcement under wage statutes, but not for consumer‐facing disclosures.
• Gurrobat v. HTH Corp. (2014) – hotel could not divert any portion of service charge to management without disclosure.
• Kawakami I v. Kahala Hotel (2014) – first hinted that distinguishing between “wages” and “tips” matters to consumers.
• Wadsworth II (D. Haw. 2014) – articulated a practicality-driven standard: clarity exists only if (a) the charge is expressly not a gratuity, (b) it is entirely for admin expenses, or (c) a specific amount/percentage goes to staff. The Supreme Court effectively constitutionalized this approach for Hawaiʻi courts.

Legal Reasoning

1. Plain-Language Interpretation – The phrase “clearly disclose” cannot be read out of HRS § 481B-14; “clear” requires that the average consumer encounter only one plausible meaning.
2. Legislative History – Committee reports reveal a dual purpose: (1) protect consumers from believing they have already tipped and (2) ensure service employees receive tips. Vague language like “a portion” frustrates both aims.
3. Text-in-Context – While “wages” may suffice for back-office accounting or tax compliance, grouping “tips or wages” obscures whether the customer still needs to tip, defeating statutory clarity.
4. Adoption of the “Specific Percentage” Requirement – Borrowing from Wadsworth II, the Court formalized the standard: partial distributions necessitate numeric disclosure. This approach gives workers transparency and consumers actionable information.
5. Form-over-Substance Rejected – Copy-and-paste statutory language is inadequate if the overall message remains ambiguous.

Impact of the Decision

• Hospitality Industry Compliance – All Hawaiʻi hotels and restaurants must immediately audit menus, contracts, banquet BEOs, room-service slips, and receipts to state the exact tip share if it is less than 100 %.
• Consumer Protection Actions – The ruling arms plaintiffs with a bright-line test; businesses face heightened exposure to class actions under HRS § 480-2 & § 481B-14 for past ambiguous wording.
• Employee Wage Litigation – Clarifies that when employers claim a “wage offset” from service charges, they must still explain the tip percentage to patrons.
• Legislative Guidance – Reinforces the statute’s original goals without new legislation, yet signals how lawmakers could codify specificity requirements for other fees (e.g., resort fees).
• Persuasive Authority Outside Hawaiʻi – Other jurisdictions grappling with “service fee” disclosures (e.g., New York, California’s SB 478 on junk fees) may cite the clarity standard.

Complex Concepts Simplified

• Service Charge – A mandatory fee added by the establishment; unlike an optional tip, the customer cannot refuse to pay it.
• Tip (Gratuity) vs. Wage – A tip is a voluntary payment belonging wholly to the employee; wages are base compensation owed by the employer and count toward minimum-wage obligations.
• Summary Judgment (MSJ) – A procedural device enabling the court to decide a case without trial if there are no material factual disputes.
• Plain-Meaning Rule – Courts interpret statutory words in their ordinary sense unless ambiguous.
• Legislative Intent – Courts look to committee reports and bill drafts to resolve statutory ambiguities.
• Dual Purpose Doctrine – When a statute aims to protect two groups (here, consumers and employees), interpretations must satisfy both objectives.

Conclusion

Rodriguez v. Mauna Kea Resort LLC transforms HRS § 481B-14 from a minimal notice requirement into a precision disclosure regime. By mandating that businesses state the exact amount or percentage of a service charge that goes to tip income whenever less than the whole charge reaches employees, the Court ensured the statute’s consumer-oriented and worker-oriented purposes are met simultaneously. Hospitality entities must respond quickly, revising all written communications and training staff to articulate the proper percentages. For practitioners, the case supplies a bright-line compliance test and a powerful litigation tool; for scholars, it underscores Hawaiʻi’s unique statutory fusion of wage law and consumer protection. Ultimately, the decision re-balances transparency in service economies where mandatory fees have proliferated, reaffirming that clarity—not mere recitation—fulfills both the letter and the spirit of the law.