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January 7, 2011 / Greg Cragg

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.

New York Tip LawsIn 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.

 

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5 Comments

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  1. k / Oct 8 2012 7:30 pm

    Why should servers be thrilled that their employer gets to determine how their money is distributed? Also why should servers be thrilled that a service charge is not a gratuity when that is what most guests would consider it to be just that? These laws do nothing to protect the employee but rather give more power and control to the employer in an industry that already takes advantage of its employees.

  2. Lu / Feb 5 2013 8:29 pm

    In NY can an employer take your tips & then decided how much he is going to pay each employee. Calling it an hourly but changing the hourly constantly. Supposedly if we have a good week the hourly should go up but it never really does it just decreases. Even during the holidays when we make a lot of tips we are never given any extra. The whole point of his system was to cover the employees during the week & lunch who weren’t making much money. But there’s usually only one person on during those shifts & sometimes they make more money then we do on the weekend. So it kind of even itself out. Is he allowed to hold our tips & pay other shifts with our tips? Is it legal for him to take our tips & decide how they should be distributed? On an average he’s paying me $60 a day & some nights I make $100 on 2 or 3 tables. We made $1000 on new years eve alone & on the night before I made $200 and worked alone. I was just paid after a month of waiting for my pay and received $245 for 4 nights. Something seriously wrong! I don’t want to have to report him but what else can I do to make him see. My re there is head waitress, I do all the training, register and organize the staff. Please help. Ild leave of I could find another job but no luck right now.
    Thank you for your consideration.
    Sincerely,
    Lu

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