Canyon Ranch Lenox Reaches $14.75m Settlement Over Tips

Canyon Ranch's policy of including an 18% service fee in place of added gratuity came back to bite them this week. It turns out that very little of the service charge ever found its way into employees' pockets, and nd when they asked management about the fate of the money, the employees claimed in a lawsuit that they were 'met with overt hostility' and told it was 'none of their business.'

But this week, in a settlement believed to be the largest of its kind in Massachusetts, the spa agreed to pay $14.75 million to about 600 massage therapists, yoga teachers, estheticians, hair stylists, waiters, and other employees who worked at Canyon Ranch between April 2004 and October 2007.

Canyon Ranch denied any wrongdoing in a 20-page settlement filed Monday with the US District Court in Springfield, where a federal judge must still approve the agreement. In a statement issued from its corporate headquarters in Tucson, the spa said that the 18 percent charge 'was never intended to be a significant part of the employees' compensation plan' and that 'any confusion or misunderstanding created by its use of the term 'service charge' was unintentional.'

According to employees, Canyon Ranch went out of its way to discourage guests from giving extra gratuities, enforcing its message that all tips are included in the 18 percent service charge, according to the suit. If guests insisted on tipping extra, employees could accept them only after first declining. Even then, the suit said, employees could not accept the money personally but had to direct guests to a designated area of the spa, where the guests had to complete a form or enclose cash in an envelope - something relatively few ended up doing.

Canyon Ranch said it has now eliminated the 18 percent service charge and replaced it with a 'resort amenities fee' that does not include tips. Canyon Ranch said it makes that clear on guests' bills and its website. The spa said it pays employees generously, has not changed wages or benefits, and will continue to prohibit tipping because it is 'consistent with the stress-free environment that Canyon Ranch guests have come to expect.'