New York Tip Laws Now Active
Following several high profile class action lawsuits against celebrity chef Mario Batali for withholding and improperly pooling tips, New York’s Department of Labor stepped in with a slew of new regulations, which became active this week, to clarify New York state law on tipping. These regulations mark the first time that New York has regulated employer practices about tipping, aside from a preexisting law against employers taking tips from employees.
In addition to increasing the minimum wage for tipped employees, the new regulations explicitly allow tip pooling by employers, whether required or voluntary. The laws prevent non-food service employees, such as managers, from taking any part of tips meant for food staff, including waiters, bussers, and bartenders. When tip sharing or tip pooling is required, employers must keep records of all tips and make these records, and any company policies on tipping, available to employees. Service charges are not considered gratuities under these new laws. Employers can require employees to pay a pro-rated share of the credit card company charges from their gratuities.
These new laws greatly increase the protections for tipped employees but do not cover all possible abuses. Although managers and other non-food servers are excluded from any tipping pools, some restaurants, including those owned by Mario Batali mentioned above, allot higher percentages of tips for senior employees over junior employees, regardless of actual work done. Creating specifics on how tipping pools should be formed would likely create too many confusing regulations to be workable, however, so the requirements that tipping records and policies be freely available should prevent most of these abuses.
New York’s new laws are also more conservative in their pay requirements for tipped employees than other states, such as California, but are much improved from what they had been. New York’s new minimum wage for tipped employees ($7.25) is close to California’s ($8.00). Unlike California employers, however, New York employers may take a credit of $2.25 per hour out of food server employee tips, as long as the employee’s total wages equal or exceed $7.25 per hour. Tip credits are allowed in 43 states and under federal law, and New York’s tip credit is one of the lowest (compare federal law, which allows a $5.12 tip credit per hour against a total minimum wage of $7.25 per hour) and is less than half what it formerly was ($5.12). Additionally, the new regulations limit the amount that an employer can charge an employee for tips collected on credit cards. This is a great improvement from being unregulated but could be further improved by shifting all credit card processing charges to the employer, as is required in California.
Overall, New York employees should be thrilled with these new regulations, which clarify previously unregulated tipping laws and increase employer responsibility. The vast majority of employers should also be pleased with these new laws, which explicitly allow tipping pools and should reduce the amount of litigation over whether tipping pools are legal. Additionally, by not providing extensive details on how to form tipping pools, employers have some discretion on how to form tipping pools without worrying about complying with exacting standards. There is some space for improvement of employee pay, but these changes are terrific developments for employers and employees.