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Tip Credit and Tip Pooling Violations

New York Attorneys Experienced in Wage and Hour Claims

Many people in New York work in the restaurant and hospitality industries, and tips comprise a substantial portion of their income. There are different wage requirements for employees who receive tips as opposed to workers who are paid a salary or straight hourly rate, but employers must nonetheless ensure that tipped employees receive adequate compensation. Unfortunately, many employers commit tip credit and tip pooling violations, and their employees suffer financial harm as a result. If your compensation includes tips, and you believe that your employer failed to pay you appropriately, you may be able to pursue claims for damages, and you should consult a lawyer. At Gerstman Schwartz, our capable New York wage and hour lawyers are adept at proving that employers that commit tip credit and tip pooling violations should be held accountable.

Federal and State Laws Regarding Tip Credits

Employers covered by the Fair Labor Standards Act (FLSA), which is a federal law, are obligated to pay non-exempt employees a minimum wage of $7.25 per hour. The FLSA permits employers to meet a portion of their wage responsibilities to tipped employees by taking a partial credit toward the employee’s minimum wage based on tips that the employee collects. Tipped employees are any workers engaged in an occupation in which they regularly receive $30 or more per month in tips. Under the FLSA, employers must still pay tipped employees at least $2.13 per hour but can use the tips earned by employees to offset the difference between $2.13 and the federal minimum wage, which is known as a tip credit. If tipped employees do not earn adequate tips to bring their earnings up to the federal minimum wage, the employer must make up the difference. Employers can only take tip credits if the employees retain all the tips that they receive.

Similar to the FLSA, the New York Labor Law (NYLL) permits employers to take tip credits to make up the difference between the rate of pay of tipped employees and the state or city minimum wage. The tip credit that is permitted varies depending on the employee’s job and is defined by the wage order for that profession. The NYLL requires employers to meet certain notice requirements to be eligible for tip credits as well. Specifically, notice must be provided in writing prior to the start of employment, and it must include specific information like the employee’s regular and overtime pay rates and the amount of tip credit, if any, to be taken from the hourly rate.

Federal and State Laws Pertaining to Tip Pooling

The FLSA also allows employers to institute mandatory tip pools, meaning that they can require employees who regularly receive tips to share them. If employers take a tip credit, they must employ traditional tip pools, which means that the pool can only include servers, bartenders, and workers who customarily receive tips. If employers do not take a tip credit, though, they can employ non-traditional tip pools that include employees who do not receive tips, like dishwashers and cooks.

Under New York law, tip pooling is described as the practice of intermingling tips earned by directly tipped employees into a common pool, which is then distributed among both directly and indirectly tipped employees. Employers are barred from partaking in tip pools and must disburse all the tips in a pool to employees. Only employees who regularly perform or assist in performing personal services for patrons can participate in a pool, and employers cannot make employees contribute more than what is reasonable or customary.

Contact a Knowledgeable New York Attorney

Working in the restaurant and hospitality industries can be lucrative, but many tipped employees are victims of their employers’ tip credit and tip pooling violations. If you were unjustly denied adequate pay or tips by your employer, it is advisable to confer with a lawyer to evaluate your options. The knowledgeable wage and hour lawyers at Gerstman Schwartz can advise you on your rights and help you seek the best possible outcome in your case. We frequently assist people in the pursuit of wage and hour claims in New York City and in Nassau and Suffolk Counties. We can be contacted through our online form or by calling our New York City office at (212) 227-7070 or our Garden City office at (516) 880-8170 to set up a meeting.

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