Servers at popular low-priced restaurants like Waffle House work just as hard as those as those at 5-star establishments. But they get paid much less. This past May, one patron at a Raleigh, North Carolina Waffle House decided he was going to give an especially generous tip to the server who was doing an exceptional job working on Mother’s Day—to the tune of $1000. But Waffle House decided that since the patron had paid with a credit card rather than cash, the server had to return the tip.
Why was Waffle House so biased against credit card tips? According to federal law, all tips over $20 have to be reported, and the employer is responsible for paying their 6.2% share (the employee pays the other 6.2%) of FICA taxes due. Waffle House didn’t want to pay the taxes, so the employee couldn’t keep the tip. The restaurant actually refused to give the server her tip and returned the entire amount to the customer’s credit card account.
Is this legal? Yes. But you really shouldn’t do it—not only is it bad karma, it’s really not a good PR move. The Waffle House story has been plastered all over the news, and when the customer found out that Waffle House had refused to give the server her tip, he sent her the cash directly. This story had a good ending for the server, but not so great an ending for Waffle House’s reputation.