Denver restaurant group faces lawsuit from former employees over 20% service charge misuse

By Olivia Young

Click here for updates on this story

    DENVER (KCNC) — When you see a service charge at a restaurant, where do you think that’s going? Employees are now taking legal action against a Denver restaurant group, claiming that 30% of an automatic 20% service charge went to management.

Culinary Creative Group is behind some of Denver’s trendiest restaurants, including Tap and Burger, Forget Me Not, Mister Oso, Señor Bear, and Bar Dough. The group is facing claims from employees that it violated Colorado wage and hour laws in a recently filed lawsuit.

“It seemed like I was a part of something really, really cool,” said Faith Lindstrom, a former Kumoya employee.

Lindstrom got a job at new fine dining Japanese restaurant, Kumoya in the fall of 2023, around the same time Hailey Jamieson started working at brunch restaurant Fox and the Hen.

“I did expo serving, barista, host, like all of it,” Jamieson said.

Both restaurants add an automatic 20% service charge to all bills, with a disclaimer that it’s equitably distributed to employees.

“They said that it was being distributed to the staff, that it was kind of like this tip pooling, kind of like gratuity thing that was supposed to be going to everyone who worked at front of house or back of house, but it wasn’t very clear how they were dividing everything up,” Jamieson said.

“I was not explained how it was split up, just that it was split up between front and back of house, and I figured that’s awesome because I want to see my back of house also get paid a livable wage,” Lindstrom said.

While customers have the option to tip on top of that 20%, the women say they rarely did.

Money from the service charge was given to employees in their paychecks, but the women say it was less than they expected.

“It maybe differed a few dollars, but it always stayed the same, and it was practically nothing. Nobody could tell us where the money was going. Nobody would tell us why we aren’t seeing 20% of the money or of the food that we’re selling,” Lindstrom said.

When employees at Kumoya raised concerns, Lindstrom says CCG held a meeting and explained that 30% of the service charge went to managers.

“I was furious because my manager could, you know, support himself, and I could not,” Lindstrom said.

In January of 2024, employees said the company reduced cash wages for front-of-house employees by about $3, changing their pay from minimum wage to tipped minimum wage.

“That was a huge, just a huge slap to the face,” Lindstrom said.

The change prompted staff at some CCG restaurants to walk out, and Lindstrom and Jamieson to quit.

“It just didn’t seem fair to me that they were, I don’t know, first of all not really being honest with … where the service charges were going, and then cutting the wages on top of that,” Jamieson said.

When another Kumoya employee filed a lawsuit against CCG through attorney Adam Harrison, both women also hired Harrison to file similar claims.

“I think it does matter whether your customers think that that’s a gratuity,” said Harrison, partner at HKM Employment Attorneys.

Harrison says he’s had dozens of other former employees reach out to him with similar claims.

The suit alleges that CCG took employees’ tips while falsely representing to customers that the service charge was equitably distributed to staff and depriving employees of state-mandated paid rest breaks. The lawsuit is seeking unpaid wages and compensation for rest periods that it alleges were not provided.

“It was like pulling teeth trying to get a break there,” Jamieson said.

Culinary Creative Group CEO Juan Padro said in a statement that service fees are different than tips, saying, in part, “Under Colorado law, service fees may be distributed to any employees, including management, at the restaurant’s discretion. All guest checks at CCG establishments clearly disclose that the checks include a 20% charge which is labeled as a ‘service fee.’ Our guest checks also include an entirely separate line for guests to leave ‘tips.'”

At Kumoya, Padro says it is only 10% of the service fee that is given to management. He also maintains that no CCG employee has ever been deprived of a break.

Padro goes on to say, “We have never misappropriated a single penny of employee tips. All tips collected are distributed to front-of-house employees. In addition, all service fee funds collected have been appropriately distributed to our staff.”

According to Colorado law, “Employers can’t claim tip credits if they take away or divert tips,” that “mandatory charges, like a 20% ‘service charge,’ aren’t ‘tips,'” and that “employers can use service charges to fund employee wages, but not for a ‘tip’ credit allowing direct wages below full minimum wage.”

“This was always a tip, and so the service charge, and any piece of the service charge that didn’t go directly to tipped employees, that … is taking tip money that they’re not allowed to take,” Harrison said.

But Harrison alleges the service charge is effectively a tip because customers believed it would go to tipped employees, and employees were paid a reduced tipped wage.

Lindstrom and Jamieson now work elsewhere in the service industry. Both women say they’re still recovering financially from their time with CCG.

“We hold value the same way as the general manager of the restaurant, the same way the CEO wouldn’t, you know, have that restaurant without me, without my fellow co-workers, that wouldn’t exist without us. So … we should be paid that accordingly,” Lindstrom said.

“A lot of people in the service industry are just trying to live and we are already getting paid like poverty wages. And so, for me .. I want equality and justice for anyone who is in my position,” Jamieson said.

The lawsuit was filed in February and is currently stayed while employees’ attorneys challenge arbitration agreements.

Full statement shared by Culinary Creative Group CEO Juan Padro:

“Culinary Creative Group (“CCG”) is extremely proud of our equitable business model which is designed to protect and fairly compensate all employees that positively contribute to the guest experience in our establishments. One aspect of our business model includes the implementation of service fees. We utilize service fees at our establishments because they allow the back of the house employees, such as dishwashers and line cooks, to participate in the upside of the restaurants in which they work. These employees are typically the most vulnerable and disadvantaged members of our team, and it is our firm belief that these back of the house employees are important contributors to the guest experience and success of our restaurants.”

“Service fees” are entirely different than “tips.” Generally, under Colorado law, tips should only be distributed to front of the house employees. Service fees, however, are subject to a different set of laws. Under Colorado law, service fees may be distributed to any employees, including management, at the restaurant’s discretion. All guest checks at CCG establishments clearly disclose that the checks include a 20% charge which is labeled as a “service fee.” Our guest checks also include an entirely separate line for guests to leave “tips.”

“The claims and allegations recently made against CCG are unfortunate and untrue. Contrary to the false accusations made against our company, we have never misappropriated a single penny of employee tips. All tips collected are distributed to front of the house employees. In addition, all service fee funds collected have been appropriately distributed to our staff. At Kumoya, for example, where Ms. White was employed for a brief period of time, roughly 90% of funds collected from service fees have been distributed to front of house and back of house hourly employees. The remaining 10% in service fee funds are commonly distributed to the restaurant’s management, as they contribute to the guest experience. The manner in which CCG implements and distributes service fees is entirely compliant with Colorado law and is consistent with how hundreds of other restaurant groups in Colorado collect and distribute service fees.”

“In addition, no CCG employee has ever been deprived of a break. We have a free-break policy, meaning that all employees may take breaks at any time and for any reason without needing permission from anyone. Further, at Kumoya, no employees are required to clock out for the breaks they take, meaning our employees receive paid breaks. Tellingly, and for these reasons, none of the individuals making accusations against CCG today raised a single complaint during the period they were CCG employees about their breaks.”

Please note: This content carries a strict local market embargo. If you share the same market as the contributor of this article, you may not use it on any platform.