Why the Notice That Lets a Minnesota Restaurant Keep a Service Charge Also Puts It in the Price

A Minnesota restaurant, hotel, or caterer that adds a percentage charge to every check and intends to keep the money has to print a notice. Minnesota wage law says so, and specifies the type size: bold, on the menu or the front of the statement of charges, telling the customer that the charge is not a gratuity and is not the property of any employee. Print it and the house owns the money. Skip it, on a charge a patron would reasonably read as payment for personal service, and the servers do.

That notice is also the sentence that loses the pricing case. The only shelter Minnesota’s junk fee law gives a food and beverage establishment covers “automatic and mandatory gratuities” — and an operator that printed the wage-law notice has certified, in bold, at a size the rule dictates, that this charge is not one.

That is the whole argument, and the rest of this article is the proof. The employee side of these charges — who owns the money, what the commissioner can order, what a server can sue for — is covered separately in Minnesota tip law after the 2024 changes. What follows is the pricing side: what the house told the customer, and what the house has to put in the price it advertises.

What paragraph (h) actually says

Minn. Stat. § 325D.44, subd. 1a(a) has required since January 1, 2025 — twenty months as of this writing on September 8, 2026 — that any advertised, displayed, or offered price include all mandatory fees. The structure of that subdivision, the remedy problem it carries, and the damages route that actually works are laid out in our treatment of the junk fee law. Food and beverage establishments got one paragraph of their own, and it is short:

(h) A food or beverage service establishment, including a hotel, is compliant with this subdivision if, in every offer or advertisement for the purchase of a good or service that includes pricing information, the total price of the good or service being offered or advertised includes a clear and conspicuous disclosure of the percentage of any automatic and mandatory gratuities charged.

Minn. Stat. § 325D.44, subd. 1a(h) (emphasis added). Three limits are on the face of it.

It is a compliance provision, not an exemption. The legislature knew how to write an exemption. It wrote three of them in the very next subdivision: motor vehicle dealer fees authorized by law, businesses regulated by the Public Utilities Commission and their affiliates, and RESPA settlement services. Minn. Stat. § 325D.44, subd. 1b. That subdivision opens with the words “Subdivision 1a does not apply to the following” and then lists them. Paragraph (h) says something entirely different — that an establishment “is compliant with this subdivision if” it does one specified thing.

The one specified thing is a gratuity disclosure. The object of (h) is “any automatic and mandatory gratuities charged.” Not service charges. Not administrative fees. Not kitchen fees, wellness fees, fair-wage fees, or back-of-house fees. Gratuities.

And the disclosure has to sit inside a total price. The sentence is grammatically strange — a price cannot literally include a disclosure — but the words the legislature used are “the total price of the good or service being offered or advertised includes a clear and conspicuous disclosure of the percentage of any automatic and mandatory gratuities charged.” I read that to require both halves: the offer states the total price, and it discloses the auto-gratuity percentage. Nothing in (h) authorizes quoting a number that is not the total.

Read (h) the other way — as a blanket sector pass keyed to disclosing a gratuity percentage — and it eats subdivision 1a(a) whole for every restaurant in the state. An establishment that charges no automatic gratuity at all would disclose a percentage of nothing and be “compliant with this subdivision” no matter what else it hid. A reading that makes an entire industry’s compliance turn on a vacuous disclosure is not a reading of this statute.

Who gets to say whether a charge is a “gratuity”?

Chapter 325D does not define the word. The Uniform Deceptive Trade Practices Act has its own definitions section, § 325D.43, and it defines exactly seven terms — article, certification mark, collective mark, mark, service mark, trademark, and trade name. Not one of them is “gratuity.”

Minnesota does define the word, in the statute that governs these charges from the employee’s side:

“Gratuities” means monetary contributions received directly or indirectly by an employee from a guest, patron, or customer for services rendered and includes an obligatory charge assessed to customers, guests or patrons which might reasonably be construed by the guest, customer, or patron as being a payment for personal services rendered by an employee and for which no clear and conspicuous notice is given by the employer to the customer, guest, or patron that the charge is not the property of the employee.

Minn. Stat. § 177.23, subd. 9 (emphasis added). The Department’s rule tells an employer what that notice has to look like — it must be “clearly printed, stamped, or written in bold type on the menu, placard, the front of the statement of charges, or other printed material given to the customer”, at 18 point on a placard and 9 point or larger everywhere else. Minn. R. 5200.0080, subp. 4b. A companion subpart puts service charges and surcharges inside the category in the first place: obligatory charges “include, but are not limited to, service charges, tips, gratuities, and/or surcharges which are included in the statement of charges given to the customer.” Subp. 4a.

Now the problem. Section 177.23, subd. 1 limits its definitions: “Unless the language or context clearly indicates that a different meaning is intended, the following terms, for the purposes of sections 177.21 to 177.35, have the meanings given to them in this section.” Chapter 325D is not sections 177.21 to 177.35. The definition does not cross the chapter line by its own force, and I will not pretend otherwise.

It does not have to. Three things carry it across.

The canon. Minnesota’s rules of construction provide that “technical words and phrases and such others as have acquired a special meaning, or are defined in this chapter, are construed according to such special meaning or their definition”. Minn. Stat. § 645.08(1). Gratuity, applied to an obligatory percentage charge on a restaurant check, is not being used in its common and approved sense. It is a term that acquired a special meaning in Minnesota law decades before subdivision 1a existed, and the legislature dropped it into a paragraph addressed to food and beverage establishments.

The legislature’s own habit. When a Minnesota legislator sits down to write about restaurant surcharges, § 177.23, subd. 9 is the definition reached for. S.F. 258, introduced and given its first reading January 16, 2025, would add a new section to chapter 325E providing that “[a] restaurant is prohibited from charging a surcharge other than (1) a gratuity, as defined in section 177.23, subdivision 9, or (2) taxes imposed by a government entity on the sale or purchase of goods.” That bill was referred to Senate Commerce and Consumer Protection and has gone no further. It is not law. But it is a clean demonstration that in this subject area the borrowed definition is the ordinary drafting move, not an aggressive one.

The Attorney General. The office that enforces subdivision 1a has already answered the question in writing, twice, and did it by pointing outside chapter 325D. More on that below.

The pincer, stated plainly

Every operator running a percentage charge has made a choice, and the two branches lead to different places.

The left column is the trap for the careful operator. Printing the bold disclaimer is exactly what Minnesota wage law tells an employer to do if it intends to keep the charge — and it is a published admission of the one fact that removes paragraph (h) from the case. The operator proves the consumer’s element on its own menu.

The right column is the trap for the operator that markets the charge as a tip substitute and routes the money to overhead. If no subp. 4b notice was given, the charge is a gratuity under § 177.23, subd. 9, and a gratuity is “the sole property of the employee” under § 177.24, subd. 3. The house cannot keep it. The choice is real in both directions, and there is no third box.

I want to emphasize what this does not depend on. Even if a court declines to import the chapter 177 definition into chapter 325D, the pincer holds on the operator’s own documents. A menu that tells the customer the charge is not a gratuity, while the establishment tells a court the same charge is an “automatic and mandatory gratuity” for purposes of (h), is a menu at war with the defense. The statutes do not cross-reference each other. The paperwork does the work anyway.

The conference committee shrank (h) on its way into law

The drafting history is short, public, and pointed. Follow one sentence from the bill as introduced to the law as signed, and the change that decides this question lands at the last stop.

H.F. 3438 was introduced in the House on February 12, 2024 and referred to Commerce Finance and Policy. The introduced bill contained no gratuity provision at all — the word does not appear in it.

The gratuity language first shows up in the first engrossment, posted March 13, 2024, and it was not a paragraph of subdivision 1a. It was a free-standing new subdivision of § 325D.44, captioned Automatic gratuity and reading in full:

A food service establishment shall be deemed compliant with this section if, in every offer or advertisement for the purchase or lease of a good or service that includes pricing information, the total price of the good or service being offered or advertised includes a clear and conspicuous disclosure of the percentage of any automatic and mandatory gratuities to be charged.

H.F. 3438, 1st Engrossment, § 3 (emphasis added); identical in the second engrossment, posted April 11, 2024. The House passed that version 70–61 on April 11, 2024.

The Senate never voted on it. It substituted its own companion, S.F. 3537, whose first engrossment, posted March 25, 2024, had already moved that sentence — word for word, this section and all — into subdivision 1a as paragraph (h), and passed the bill as amended 41–24 on May 1, 2024.

Then the conference committee deleted everything and rewrote it. The report was posted May 10, 2024 and is carried in the bill’s action record as “Conference committee report, delete everything”. The House adopted it and repassed the bill 76–57; the Senate adopted it and repassed 36–31. The bill was presented to the governor May 17, 2024 and signed May 20, 2024 at 1:47 p.m. 2024 Minn. Laws ch. 111.

The paragraph quoted at the top of this article is what came out of that rewrite. Compare the engrossed sentence to the enacted paragraph word by word and the conference committee made five changes. It widened who qualifies — food service establishment became food or beverage service establishment, including a hotel. It dropped or lease. It changed shall be deemed compliant to is compliant. It trimmed gratuities to be charged to gratuities charged. And it changed this section to this subdivision.

That last one is the whole ballgame. Under either chamber’s version, a qualifying establishment that disclosed its auto-gratuity percentage would have been deemed compliant with all of § 325D.44 — every deceptive trade practice enumerated in subdivision 1, not merely the pricing rule. The House put that pass in a subdivision of its own and the Senate put it inside subdivision 1a, but both of them said this section. The conference committee is what shrank it to this subdivision. A legislature that narrows a safe harbor on its way to enactment did not intend the narrow version to function as the broad one.

Somebody wrote a bill to delete (h). That tells you what (h) is worth.

If paragraph (h) already exempted food and beverage establishments, nobody would need to write a bill exempting food and beverage establishments. Somebody wrote one.

S.F. 3225 is styled “A bill for an act relating to commerce; exempting food and beverage service establishments from the mandatory fee advertisement requirement; amending Minnesota Statutes 2024, section 325D.44, subdivisions 1a, 1b.” It was given first reading April 2, 2025 and referred to Senate Commerce and Consumer Protection; the only docket entry since is a change of chief author on March 4, 2026. It has had no committee action and it is not law.

What matters is its mechanics. Section 1 of the bill strikes paragraph (h) outright and reletters (i), (j), and (k) up the alphabet. Section 2 then adds a genuine exemption in the place where exemptions live — a new clause (4) of subdivision 1b, covering “individual food or beverage items sold directly to a consumer by” a restaurant, a hotel, a bar, a food concession as defined by § 157.15, a grocery store or grocery delivery service, or

a menu or contract for banquet or catering services that fully discloses the terms of service if a mandatory fee or charge is clearly and conspicuously displayed with an explanation of the mandatory fee or charge’s purpose on an advertisement, menu, or other display that meets applicable United States Food and Drug Administration type-size requirements under Code of Federal Regulations, title 21, part 101.

Read that and the drafting judgment is unmistakable. Whoever drafted S.F. 3225 concluded that (h) does not exempt anyone, that it is worth nothing to the industry as written, and that the fix is to delete it and start over inside subdivision 1b with a disclosure-based exemption that reaches banquet and catering contracts by name.

I agree with the drafter about the current law. The bill would change it. Until it passes, it is evidence of what the statute does not say.

Two bills, pointed in opposite directions, both stalled in the same Senate committee: one to ban non-gratuity restaurant surcharges outright, one to exempt food and beverage establishments from the pricing rule. Neither is law. The law is what the 2024 conference committee wrote.

What the Attorney General has said about restaurant fees

The Attorney General’s Office published a five-page document, Frequently Asked Questions About Minnesota’s New Price Transparency Law, marked Revised: 4/2025. It devotes a section to restaurants, and the answers are not hedged.

On automatic gratuities, the FAQ agrees that food and beverage establishments may keep charging them and that the gratuities themselves “do not need to be included in the advertised total price”. Then comes the sentence nobody quotes back:

However, if the charge at issue is not a gratuity as that term is defined under applicable Minnesota laws and rules, and is instead a mandatory fee, then that fee must be included in the total price advertised, displayed, or offered to consumers by the restaurant.

The FAQ says it again under its own heading, “What about mandatory fees charged by restaurants?”:

If a restaurant charges a mandatory fee, other than an automatic and mandatory gratuity as gratuity is defined elsewhere in Minnesota law, it must be included in the total price advertised, displayed, or offered to consumers by the restaurant.

Twice the enforcing office sends the reader out of chapter 325D for the meaning of the word — once to “applicable Minnesota laws and rules”, once to how “gratuity is defined elsewhere in Minnesota law”. There is one place in Minnesota law that defines gratuities in the restaurant setting, and one rule that amplifies it: § 177.23, subd. 9 and Minn. R. 5200.0080, subps. 4a and 4b. The office reads the borrowed definition into paragraph (h). So do I.

The FAQ answers the wellness-fee question in the same register. A health and wellness fee that is a mandatory fee under the new law “would need to be included in the total price the restaurant advertises, displays, or offers to consumers”, and the law does not bar the charge itself “nor does this law prohibit a restaurant from also itemizing the fee, in addition to showing the total price”. The fee is legal. Keeping it out of the price is not.

Banquets and catering are squarely inside the law

The FAQ has its own “Private Banquets” heading, and the answer to “Are Private Banquet Services Subject to this new law?” is one word followed by a rule: “Yes, the new law generally applies to a business’s banquet or catering services. Accordingly, when advertising, displaying, or offering a price for these services, the total price must include all mandatory fees such as a surcharge or service charge. The new law applies to banquet or catering contracts signed on or after January 1, 2025, with consumers, which is the date the new law takes effect.”

The office then prints a compliant and a non-compliant event order, and the difference between them is the whole lesson. Both carry the same footnote language that the service charge “is not a gratuity, and is used to cover the costs associated with employing staff.” The non-compliant one says only that “[a]n additional service charge will be added to all food and beverage” and totals the food, liquor, and labor without it. The compliant one states the percentage — “A service charge of 5% has been added to all food and beverage” — and carries it into the line items and the total.

Notice what the Attorney General’s own compliant example concedes. The charge in it is expressly not a gratuity. It is compliant not because paragraph (h) shelters it but because the price includes it. That is the rule for every charge that is not a gratuity, whatever it is called.

A hypothetical, since this is where the money is. A wedding quote lists food at $9,000, bar at $2,400, and labor at $1,000, totals $12,400, and adds an asterisk reading a 7% service charge applies to all food and beverage; the service charge is not a gratuity. The total price offered was not $12,400. It was $13,198 — the $11,400 in food and bar carries $798 of service charge. Under § 325D.44, subd. 1a(a), the number on the quote had to be the second one.

Has any Minnesota court decided this?

Not paragraph (h). Subdivision 1a took effect January 1, 2025, and I found no Minnesota appellate decision construing it. I searched three ways — by statutory citation, by the statute’s operative language (“mandatory fees or surcharges”), and by the phrases a court would have to write (“automatic and mandatory gratuities” and “food or beverage service establishment”). Every one came back empty. The controls returned results on the same corpus, so the searches work; the archives simply have nothing yet. Treat everything above as my reading of the text, not a holding.

The definitional half of the pincer is a different story, and it is not new law at all. In In re the Alleged Labor Law Violation of Chafoulias Management Co., 572 N.W.2d 326 (Minn. App. 1997), review denied (Minn. Feb. 19, 1998), the Court of Appeals confronted an employer arguing that its percentage charges were not gratuities. The court quoted § 177.23, subd. 9, observed that the “definition is amplified by Minn. R. 5200.0080, subp. 4a (1995)”, rejected the employer’s federal-regulation analogy because those regulations “are at variance with Minn.Stat. § 177.23, subd. 9”, and held: “We conclude that the 12% charges at issue were gratuities.” 572 N.W.2d at 329-30. It then drew the consequence: “Our determination that the 12% charges were gratuities compels the conclusion that relator violated the statute by diverting part of the 12% to itself.” Id. at 331.

A published Minnesota decision has therefore already done the hard part — it has taken a percentage charge added to customers’ bills, applied § 177.23, subd. 9 and subp. 4a, and called it a gratuity. Subdivision 1a(h) uses the same word about the same kind of charge in the same kind of business.

What this means for a menu

A charge you keep goes in the price. If the establishment gave the bold-type notice so it can retain a service charge, administrative fee, kitchen fee, or wellness fee, that charge is not a gratuity, paragraph (h) is unavailable, and § 325D.44, subd. 1a(a) requires the charge to be inside every advertised, displayed, or offered price — the menu, the website, the online ordering screen, the third-party listing, the banquet quote.

An auto-gratuity still has to be a real gratuity. Paragraph (h) protects gratuities that are automatic and mandatory. A charge is not one if the house keeps any part of it, because § 177.24, subd. 3 makes a gratuity “the sole property of the employee.” An establishment claiming (h) is making a representation about where the money goes, and that representation is discoverable.

Print the percentage. Even a genuine auto-gratuity reaches (h) only through “a clear and conspicuous disclosure of the percentage” of it. A quote that names a service charge without ever stating a number does not satisfy the paragraph on any reading of it.

Save the first price you saw. The violation is fixed by what was advertised, displayed, or offered — the listing, the menu photograph, the screenshot of the ordering page — not by the receipt. Where the charge finally surfaced is a separate question from whether the first number was the total.

None of this is about the person carrying the plates. The charge is a pricing decision made by an owner, and where the money goes afterward is a payroll decision made by the same owner. Servers, bartenders, and kitchen staff are on the wrong end of both.

Two statutes, two audiences, one document. If the menu tells the customer the charge is not a gratuity, the menu has also told the customer what the price should have been.

The damages question — which Minnesota statute actually produces a check, and why it is not the deceptive trade practices act — is taken up in the Consumer Fraud Act and Deceptive Trade Practices Act and in the private attorney general statute. For a single event contract with clean paper, conciliation court is often the proportionate forum. And § 325D.45, subd. 2 allows attorney fees to a prevailing party where “the party charged with a deceptive trade practice has willfully engaged in the trade practice knowing it to be deceptive” — which is worth remembering about an operator whose own menu cites the statute.

Madgett Law, LLC

Madgett Law, LLC represents Minnesota consumers in deceptive pricing and consumer fraud disputes, and also handles landlord-tenant, debt collection, and credit reporting matters, in state and federal court. If you were quoted one number for a meal, an event, or a catering contract and charged another, we can tell you whether a statute reaches the difference and what the documents have to show. Call 612-470-6529 or send us a message.

Sources: Minn. Stat. § 325D.44, subd. 1a(a) (advertised, displayed, or offered price must include all mandatory fees or surcharges), subd. 1a(b) (definition of “mandatory fee”; tax exclusion), subd. 1a(h) (food or beverage service establishment compliance through clear and conspicuous disclosure of the percentage of automatic and mandatory gratuities, within the total price), subd. 1b (exemptions: motor vehicle dealer fees authorized by law, PUC-regulated businesses and affiliates, RESPA settlement services); Minn. Stat. § 325D.43, subds. 1–8 (the act’s definitions — seven defined terms, none of them “gratuity”); Minn. Stat. § 325D.45, subd. 2 (attorney fees to the prevailing party on willfulness); Minn. Stat. § 177.23, subd. 1 (definitions apply for purposes of §§ 177.21 to 177.35), subd. 9 (definition of “gratuities,” including an obligatory charge absent clear and conspicuous notice that the charge is not the property of the employee); Minn. Stat. § 177.24, subd. 3 (gratuity is the sole property of the employee); Minn. Stat. § 645.08(1) (technical words and phrases and those that have acquired a special meaning are construed according to that special meaning); Minn. R. 5200.0080, subp. 4a (obligatory charges include service charges, tips, gratuities, and surcharges in the statement of charges), subp. 4b (form and type size of clear and conspicuous notice that an obligatory charge is not a gratuity); 2024 Minn. Laws ch. 111, §§ 1–2 (H.F. 3438; enactment of subds. 1a and 1b; effective January 1, 2025, except June 1, 2025 for industries whose prices are regulated by the Metropolitan Airports Commission; presented May 17, 2024, signed May 20, 2024); H.F. 3438, 93rd Legislature (2024), Introduction (posted February 1, 2024; no gratuity provision), 1st Engrossment (posted March 13, 2024) § 3 and 2nd Engrossment (posted April 11, 2024) (free-standing “Automatic gratuity” subdivision; “deemed compliant with this section”), Conference Committee Report (posted May 10, 2024) and 3rd Engrossment (posted May 16, 2024) (paragraph (h); “compliant with this subdivision”), and the bill’s action history (House first reading February 12, 2024; House passage April 11, 2024, 70–61; Senate passage May 1, 2024, 41–24; “Conference committee report, delete everything”; House adoption of the conference report and repassage, 76–57; Senate adoption of the conference report and repassage, 36–31 — the House and Senate action records date the two repassages differently, at May 13/15 and May 15/17 respectively, so no repassage date is asserted here; presentment May 17, 2024; approval May 20, 2024); S.F. 3537, 93rd Legislature (2024), 1st Engrossment (posted March 25, 2024) (Senate companion; the same sentence already placed at subd. 1a(h) but still “deemed compliant with this section”; the text the Senate substituted for H.F. 3438 before passing it May 1, 2024); S.F. 3225, 94th Legislature (2025–2026), Introduction (posted April 1, 2025; first reading April 2, 2025; referred to Senate Commerce and Consumer Protection; chief author changed March 4, 2026) (striking § 325D.44, subd. 1a(h) and adding a food and beverage exemption at subd. 1b(4)); S.F. 258, 94th Legislature (2025–2026), Introduction (posted January 15, 2025; first reading January 16, 2025; referred to Senate Commerce and Consumer Protection) (proposed § 325E.85, prohibiting restaurant surcharges other than a gratuity “as defined in section 177.23, subdivision 9” and government-imposed taxes); In re the Alleged Labor Law Violation of Chafoulias Management Co., 572 N.W.2d 326, 329-31 (Minn. App. 1997), review denied (Minn. Feb. 19, 1998) (§ 177.23, subd. 9 as amplified by Minn. R. 5200.0080, subp. 4a; 12% charges were gratuities; diverting part of them to the employer violated § 177.24, subd. 3); Minnesota Attorney General’s Office, “Frequently Asked Questions About Minnesota’s New Price Transparency Law” (5 pp.; Revised: 4/2025; ag.state.mn.us) (restaurant automatic gratuities and mandatory fees; health and wellness fees; private banquet and catering services; compliant and non-compliant event orders). This article is general legal information about Minnesota law. It is not legal advice, it does not create an attorney–client relationship, and no particular outcome is promised or implied. Statutes, rules, and pending legislation change; verify the current text before relying on any provision discussed here.