The law increasingly says no on both sides of the Atlantic — but some restaurants found a workaround by simply changing the label on the line.
No, not lawfully, in a growing number of places — but the rules are genuinely uneven, which is exactly why this keeps catching diners off guard. In the US, there's no single federal rule, but states including California, Colorado, Florida, and Massachusetts have passed disclosure laws in 2025-2026 requiring any mandatory service charge to be clearly shown before you order, not just buried in fine print on the bill. In the UK, the Employment (Allocation of Tips) Act 2023, in force since October 2024, requires disclosed service charges to go 100% to staff — but some restaurants responded by simply renaming the charge something else entirely, which is the loophole worth knowing about.
| United States | United Kingdom | |
|---|---|---|
| Federal/national rule | None specifically requiring disclosure — this is entirely state-by-state | Employment (Allocation of Tips) Act 2023, in force since 1 October 2024 |
| States/regions with active disclosure laws | California, Colorado, Massachusetts (all 2025-2026); Florida's disclosure law (Fla. Stat. § 509.214) takes effect 1 July 2026 | Applies UK-wide |
| What's required | Clear, conspicuous disclosure of the existence, amount, and purpose of the charge before you order — on menus, websites, apps, and receipts, depending on the state | If it's called a "service charge," it must be clearly disclosed and legally must go 100% to staff without deduction |
| Does it have to go to staff? | Not necessarily — a service charge is legally treated as employer revenue, not a tip, unless the employer chooses to distribute it (some states, like New York, presume it's owed to staff absent proper disclosure otherwise) | Yes, if labeled a "service charge" — this is the entire point of the 2023 Act |
| The known loophole | N/A | Renaming the charge "admin fee," "kitchen contribution," or "venue levy" — these are not legally "tips" or "service charges," so the Act doesn't technically apply to them, even though the money still isn't going to your server |
The UK renaming pattern is worth understanding in some detail, because it's a real, documented practice, not a hypothetical. Before October 2024, UK restaurants could add a discretionary service charge, keep the money without any obligation to pass it to staff, and there was nothing unlawful about that. Once the Act closed that gap for anything actually labeled a "service charge," some restaurants — reportedly concentrated in London — began using alternative labels for what is functionally the same charge, specifically because those labels fall outside the Act's wording. A hospitality union has publicly called this practice "completely disingenuous," even while acknowledging it may not technically breach the letter of the law.
If the menu, website, or booking confirmation clearly states a mandatory charge and its amount before you commit, this generally meets disclosure requirements in both jurisdictions — and in the UK, that charge legally has to reach staff in full.
If a mandatory charge wasn't disclosed anywhere before you ordered — not on the menu, the website, or verbally — this is precisely what the newer US state disclosure laws (and general UK contract fairness principles) are designed to prevent. You have a real basis to dispute it.
This may be technically legal under the letter of the 2023 Act, since it isn't labeled a "service charge" or "tip" — but it's functionally the same money, and it isn't required to reach your server. If you see a charge you don't recognize that isn't food or drink, you're entitled to ask exactly what it covers and where it goes.
This is common practice in the US and generally lawful as long as it's disclosed before ordering — the amount itself isn't capped by any federal law, though extreme rates could theoretically face challenge under general consumer protection principles.
A clear line on the menu and receipt: "An 18% service charge is added to all bills, distributed in full to our service staff" — disclosed before ordering, matching what actually happens to the money.
A mandatory charge that appears only on the final bill with no prior disclosure anywhere, or a charge deliberately relabeled to avoid staff-distribution requirements while functioning exactly like the service charge it was rebranded to avoid.
Use our Hospitality Billing Dispute Letter generator to formally challenge an undisclosed or unexplained charge.
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