A mandatory 18% charge at Swahili Village Bar and Restaurant in Newark is not legally the same as a voluntary tip, but how the restaurant allocates that charge is at the center of a dispute with workers. Under a policy that took effect Aug. 3, 70% of the charge goes to service-team compensation and 30% to operating expenses. The restaurant had previously distributed the full charge to staff, NJ.com reported.
What workers allege—and what the owner disputes
In a video circulated by former employees, workers said they were fired after questioning the tipping policy and said they wanted their jobs and tips back. Owner Kevin Onyona denied withholding wages or terminating employees for raising questions, saying some employees chose to leave. Staff were notified of the policy change by email on Aug. 6, three days after it took effect, according to NJ.com. The accounts do not by themselves establish whether anyone was unlawfully fired or whether wages are owed.
A service charge is not a tip
The distinction turns on customer choice. The U.S. Department of Labor says a compulsory service charge is not a tip under the Fair Labor Standards Act because customers cannot choose whether to pay it or set its amount. Attorney Charles J. Kocher told NJ.com that the restaurant’s mandatory-charge policy is legal; that general distinction does not settle the workers’ allegations about this workplace. Onyona said the charge is separate from voluntary tips, which he said the restaurant does not retain, and that employees receive those tips in addition to the charge. The federal explanation is available in the Labor Department’s guidance.
The charge also does not eliminate the obligation to meet minimum-wage requirements. NJ.com reported that Swahili Village does not count the service charge as a customer tip toward the tip credit. New Jersey’s minimum cash wage for tipped employees is $6.05 an hour, compared with a standard minimum wage of $15.92; employers must make up the difference if a worker’s cash wages and tips fall short, the outlet reported. Onyona said the restaurant uses a payroll system to comply with state wage laws.
Separate cases offer context, not a verdict on Newark
Swahili Village has faced a separate wage case in Washington, D.C. The D.C. attorney general’s office said Swahili Village M Street LLC and Onyona were required to pay $526,973 to workers and the District to resolve a 2023 wage-theft lawsuit. The settlement included $197,614 in penalties to the District and required the business to report on wage-law compliance for three years. That case involved the D.C. operation; it does not establish whether the Newark restaurant’s current service-charge policy or its handling of employees complied with the law. The terms are described in the D.C. attorney general’s release.
Policy discussions elsewhere illustrate that lawmakers can take a different approach to fee allocation. In testimony supporting Maryland Senate Bill 886, Sen. C. Anthony Muse described a proposal to require restaurants to disclose service fees and distribute them directly to the employees who performed the service. The testimony describes a proposed measure, not current law, and it does not govern the Newark restaurant. Muse’s written testimony sets out that proposal.
