Are tip pools legal?
TIp pools are legal if employers follow certain requirements. A “tip pool” means that all tips are all pooled together and then redistributed according to a preset plan.
A tip pool cannot include managerial employees or back-of-house employees such as chefs, line cooks and dishwashers. Employers and managers cannot take a portion of tips or wages to pay expenses of the business or to cover for losses, bad checks, order mistakes, or unpaid bills.
Finally, employers may not require tipped employees to forfeit some of their tips in order to receive their hourly wages. This practice, known as a “kickback,” is illegal under the New York Labor Law. If your employer forces you to forfeit some portion of your tips in order to receive the rest of your wages, contact Pelton Graham today.
Do tipped workers receive overtime?
Yes! Tipped workers must receive overtime when they worked over 40 hours in a week. The overtime rate is calculated as 1.5 times the regular minimum wage, minus the tip credit (the difference between the regular minimum wage and the tipped minimum wage). Find out more information on unpaid overtime.
Take the example of a food service employee in New York City at a large employer working in 2020. The tipped minimum wage for a food service employee in New York City at a restaurant with 11 or more employees is $10 per hour with a tip credit is $5. The overtime rate is $17.50.
This is calculated as the regular minimum wage rate ($15) times 1.5 for a regular overtime rate of $22.50. The tipped overtime rate is the regular overtime rate minus the $5 tip credit. Find out more on calculating overtime.
Who receives service charges?
Many restaurants bill customers for a “service charge,” especially for large events. While customers may assume this “service charge” is paid to employees, this is often not true.
In New York, courts have decided numerous cases regarding service charges. In general, where a reasonable customer would assume that a service charge would be paid to tipped employees, those amounts must be paid to tipped employees. If a bill clearly states that service charges are paid to the restaurant and not to tipped employees and that any tips should be paid separately, an employer may be able to keep the service charge.
If you are a tipped employee and your employer bills customers for service charges that are not paid to staff, contact Pelton Graham to discuss whether you are entitled to receive service charges.