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Canyon Ranch Inc. agreed this week to pay about $14.75 million to staff members in Massachusetts who say their tips were diverted for almost two decades.

The Tucson-based company's settlement affects about 600 massage therapists, yoga instructors and other employees at its luxury resort in Lenox, Mass.

Canyon Ranch, a 200-room resort in the Berkshire Mountains that employs about 800 people, charged customers an 18 percent service fee and told them tipping was unnecessary. But the employees said they received little, if any, of the fee.

Canyon Ranch never used the term "gratuity" for its 18 percent surcharge, said Chief Executive Officer and Vice Chairman Jerry Cohen.

From the spa's opening in 1979 until late in 2007 it was referred to as a service fee, Cohen said. Since then it's been known as a "resort amenity fee."

Cohen said the service charge was never meant to cover tips but rather as a fee to cover costs such as rides to and from the airport and local phone calls.

"We didn't want to nickel-and-dime our guests, so we had an all-inclusive rate that included a service charge, a very unfortunate choice of words," he said.

A group of workers filed a class-action lawsuit in May 2007, claiming they "feared that they would lose their jobs if they pursued their inquiries or pressed for payment of the tips."

The agreement was made necessary by a "fairly obscure and very complicated law" that was passed by the Massachusetts Legislature in 2004, Cohen said.

"Because of that law, this is a case that could have dragged on for three, four or five years," he said. "It would have been injustice to our staff and our guests to have this hanging over our heads for a prolonged period of time."

The company denied any wrongdoing, and said "any confusion or misunderstanding created by its use of the term 'service charge' was unintentional."

The settlement is believed to be the largest of its kind in the state. It follows other high-profile cases involving service workers in the airline and restaurant industries who successfully sued for what they said were tips folded into revenue by their employers rather than distributed.

Cohen said he believes Canyon Ranch employees are paid enough that they don't need to depend on tips for adequate compensation.

But he said tipping is not prohibited, although employees are required to tell guests who try to tip them that tipping isn't required. After they inform the guest of that policy, Cohen said, if a tip is still offered, employees can accept.

"We didn't want employees to have to depend on gratuities. We really want our guests to come to Canyon Ranch for the totality of the experience. A lot of our guests come here to get away from the stresses of everyday life," Cohen said.

Canyon Ranch's Tucson operation has more than 1,000 full-time and part-time employees.

Arizona does not have a law that would have upheld the Massachusetts workers' argument in this case, said Tucson employment law attorney Tibor Nagy, of the law firm Ogletree Deakins.

But Nagy said employers could be on questionable ground if they gave employees a reasonable expectation of getting gratuities but did not distribute that money to them.

Nagy said that is based on a mechanism known as a "tip credit," which lets employers pay employees up to $3 an hour less than minimum wage if they typically would make up the difference in tips.

He said there is nothing in Arizona's laws and regulations that would keep employers from prohibiting workers from collecting tips or requiring them to distribute gratuities collected from customers.