Credit Card Tips Cost Steak 'N Shake Servers

Tips Will Be Trimmed To Cover Processing Fee

Some Steak 'n Shake servers are upset the Indiana-based chain is now trimming tips to cover credit card costs.

Starting Tuesday, waiters and waitresses who get tipped on a credit card will have to use a portion to cover the cost of processing the plastic -- 2.5 percent per transaction, 6News' Rafael Sanchez reported.

A Steak 'n Shake server who spoke to 6News on the condition of anonymity for fear of losing her job called the new fee excessive.

"That's the cost of doing business. That's an overhead. The server has no say in whether we accept credit cards," she said. "Next time, they'll want us to pitch in for rent, electrical bill. Where does it end?"

Employees were asked to sign a document agreeing to the new rule. Those who object can be reassigned or will be asked to quit, the server told 6News.

Officials with the Indiana Restaurant Association said state and federal law allow restaurants to pass on credit card fees to their employees.

"No employer can pass on 100 percent of tips put on a credit card. They don't receive these funds. They are withheld by the credit card company," said organization CEO and President John Livengood.

Livengood said some restaurants have established service charges to achieve the same goal, although he said the practice is not as common in Indianapolis as it is in other parts of the country.

"They'll add a service charge instead of a gratuity. That way, that money becomes the restaurants' money and they can then use it to pay wages and cover costs of the business," Livengood said.

Florida-based Darden Restaurants, which operates Red Lobster, LongHorn Steakhouse and Olive Garden, said it does not pass on credit card processing fees to its servers.

Several industries claim the credit card processing fees are cutting into their profits.

Restaurant and gas station owners are among those supporting a new federal law that will cap the credit card processing fee at 2 percent. The law is set to go into effect in July.

In turn, the banking industry said any caps will force it to jack up prices and cut services.

Steak 'n Shake did not return calls or emails for comment on the new rule.

More Information: Steak 'n Shake Tipping Agreement