Automatic Gratuity in North Carolina: Legal, With Rules

Yes, automatic gratuity (service charge) is LEGAL in North Carolina. However, it is regulated:

Key Rules (N.C. Gen. Stat. § 95-25.14 & Dept. of Labor Guidance)

• Disclosure: Must be clearly posted (menu, table tent, sign) before ordering. Typical language: "A 18–20% service charge will be added to parties of 6 or more."
• Not a Tip: Legally a service charge (employer property), not a tip (employee property). Employer may keep it (though most distribute to staff).
• Minimum Wage Interaction: If treated as wages, must meet minimum wage + overtime rules. If distributed as tips, tip credit rules apply (employer can pay $2.13/hr if tips make up diff to $7.25).
• Large Parties Only: Common practice: auto-gratuity for parties ≥6–8. For smaller parties, voluntary tip.
• Customer Already Paid: Cannot add after payment tendered.
• Credit Card Fees: Employer may deduct processing fee from service charge portion allocated to employee (controversial; varies).

Best Practice for Restaurants

1. Post notice prominently.
2. Distribute 100% to service staff (morale, retention).
3. Track separately from voluntary tips for tax/FLSA.
4. Train staff to explain: "This is a service charge, not a tip; additional tip welcome."

Consumer View

You cannot legally refuse a properly disclosed auto-gratuity. Dispute = civil matter. Tip on top is voluntary.