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Tipping FAQ

Tipping FAQ
TIP CREDIT AND MINIMUM WAGE IN NEW YORK

What Waiters and other Food service Employees Should Know

What laws govern tips and gratuities?

Tips and tipped employees are governed by

  • • New York Labor Law, Section 196-d
  • • the New York State Minimum Wage Orders

Of the Minimum Wage Orders, most tipped employees are governed by the Hospitality Industry Wage Order, which governs restaurants and hotels.

The Miscellaneous Industries Wage Order governs tipped employees who do not work in the hospitality industry, for example: car wash attendants, hairdressers, golf/tennis instructors, valet parking attendants, doormen, etc..

Who is governed by the provisions concerning tips?

All private sector employers and employees are subject to the provisions governing tips.

What is a tip?

A tip (or gratuity) is defined by the New York State Department of Labor as "money given by a customer to an employee for service provided to the customer."

A tip can be given in the form of

  • • Cash
  • • Check
  • • Credit Card
  • • Any other form of payment

There is a rebuttable legal presumption that any charge which is not for food and drink is a tip. Any charge made to the customer, over and above charges for food, drink, lodging or other specified goods or services, is presumed to be a tip and must be given to the employee who provided the service.

What are Tip Credits or Tip Allowances?

A tip credit (or tip allowance) is the amount of tips earned by an employee that an employer is legally permitted to count as a credit against the minimum wage requirements for that industry.

Tip credits/allowances differ depending on the type of industry or occupation within the hospitality industry. Your tip credit (and hence your regular minimum wage) will differ depending on what kind of job you have. Your hourly salary added to your "tip credit" must add up to $7.25, which is the current minimum wage in New York State. The Hospitality Wage Order establishes the Tip Credit for different types of employee as follows:

Food Service Workers- $5.00 minimum wage with a $2.25 maximum hourly tip credit.

Service Employees in Restaurants and All-Year Hotels- $5.65 minimum wage with a $1.60 maximum hourly tip credit.

Service Employees in Resort Hotels- $4.90 minimum wage with a $2.35 hourly tip credit if tips add up to at least $4.10 per hour,

In order to claim a tip credit/allowance–and thus be able to pay a reduced minimum wage–an employer must prove that the employee actually received his or her tips. He must also provide employees, before or at the time of hiring, that a tip credit will be applied toward their minimum wage.

Food Service Workers- any employee who is primarily engaged in the serving of food or beverages and regularly receives tips. This includes waiters/waitresses, bar tenders and busboys. This does NOT include delivery persons.

Service Employee- an employee, other than a food service worker, who customarily receives tips at the rate of $1.60 or more per hour.

What happens if a customer leaves a tip by credit card?

When a customers leaves a tip on his credit card bill, the employer must pay the employee the tip no later than the next regularly scheduled pay day. The employer may subtract from the employee's tips the pro-rated share of the charge levied by the credit card company.

The employer must always include a breakdown between the tips and the regular wages on the employee's wage statement.

Can an employee ask his or her employer to withhold cash tips until pay day?

Yes. As a service to employees, employers may retain the employee's cash tips earned over the course of the pay period. The employer must issue a tip payment for the total amount of the cash tips along with the wage payment for the same pay period. The employee's request for this service must be voluntary. It cannot be a pre-condition of employment or a condition of continued employment. The employer must still keep a daily record of the tips earned by each employee who opts for this service. The wage statement provided with the tip payment must contain the breakdown of tips and wages.

What are tip pools and what is tip sharing?

Tip sharing- when directly tipped employees share their tips with other workers who provided direct customer service.

The following employees cannot be in the Tip Share:

  • • Managers
  • • Owners
  • • Kitchen help

Tip pooling- when directly tipped employees pool their tips and redistribute them among directly and indirectly tipped employees.

Employees who may be included in a Tip pool:

  • • waiters
  • • busboys
  • • bartenders
  • • food runners/expediters
  • • hostess
What can an employer NOT do? Or how can an employer violate your rights?

An employer cannot misuse the tip pool by requiring employees to share their tips with other workers who are not customarily tipped.

Paying less than Minimum Wage: An employer must pay you the minimum wage–either as a straight $7.25 per hour wage or $5.00 per hour plus the "tip credit." This is a requirement of the law.

Spread-of-Hours Pay: employees must be paid an extra hour for days on which they work more than ten hours. This is frequently ignored by restaurant employers in New York.

Overtime Pay: Employees are entitled to overtime pay (time and a half) for all hours worked over 40 in a week.

Stealing tips: Tips belong to service staff only. It is unlawful for owners and managers to take a share of the tips for themselves.

Payment of tips alone: Some restaurant employers don't pay a wage and the staff works just for tips. This is unlawful.

Misuse of "Service charge" or "gratuity": Some restaurants, on the bill, charge customers a fixed gratuity or service charge and the customers are led to believe that this is a tip that will be given to the wait staff. As noted above, there is a rebuttable legal presumption that any charge which is not for food or beverage is a tip. If an employer wants to charge a service charge, he must give the customers clear notice that fulfills the requirements of the Wage Order.

Training Pay: Waiters and other employees must be paid for the time they spend in training. If the training is mandatory, then the employee must be paid minimum wage for this time (if the trainee does not receive tips during his training period, then me must be paid the FULL minimum wage of $7.25 per hour).

Uniform care and laundering: It is unlawful for an employer to require the waitstaff to purchase or launder their uniforms without reimbursing them for these costs.

Breakage Charges: Many employers charge staff for breakage of plates or glasses by taking money out of their tips. This is not permitted.

"Dine and Dash": Waiters are often forced to use their tip money to pay the bill for customers who leave without paying. This is unlawful.

Selected to New York Super Lawyers, 2010, 2011, 2012, 2014