It may constitute a form of consummer fraud or an unconscionable commercial practice if it is not made clear that the service charge is not a tip, since ordinarily, it is. From what you describe, it is actually a surcharge or price increase on the meals masquerading as a tip, and that is what may make it illegal.If it were fully and properly disclosed, it would be legal--though then, the restaurant would have to pay at least minimum wage and could not claim the "tip credit."