What Are New York Laws on Tip Pooling?

One class action lawsuit after another has brought tip pooling into the legal limelight. The National Restaurant Association (NRA) has even filed a petition against the U.S. Department of Labor that alleges the courts have given the DOL authority in tip pooling matters that exceeds the scope Congress intended.

The Ninth Circuit and Fourth Circuit federal courts are divided in rendered decisions regarding tip pooling, and in addition, differing laws also exist at the state levels. For nationwide chains, the lack of consensus is particularly confusing and burdensome.

Despite the confusion, if you are a New York restaurant owner, it behooves you to understand and comply with NY laws on tip pooling.

New York Tip Credit Laws

Under NY law, employers can take tip credits, which means employers can count the employee’s tips toward minimum wages. If the tipped employee does not make enough in tips to equal the minimum wage, the employer must make up the difference, and the “credit” is the amount of wage the employer does not have to pay because it is covered in tips.

In New York, the tip credit varies based on the industry and is different for restaurants and hospitality industries, such as hotels and other lodgings. If an employee’s job involves both tipped services and non-tipped work, New York law requires that the employer not claim a tip credit for the entire day if the employer works two hours per day or more than 20 percent of the shift doing non-tipped work. The employer must pay the employee the full NY State minimum wage, including for the hours the employee was earning tips.

New York Tip Pooling Laws

In New York, employees subject to tip pooling can chip in their share of tips, and the employer divides the tips among the employees whose jobs principally provide services that customers tip, such as serving, busing tables, running food to tables and hosting. Employers cannot keep any part of the pool or tip sharing and must distribute the money to the employees.

In New York, if the customer leaves a tip on a credit card, the employer may deduct a percentage of the tip amount to cover the credit card fee. An example would be to deduct three percent of the tip amount if the credit card company charges a three percent credit card fee.

(For further information see Nolo: New York Law for Tipped Employees )

Representing Employers Tip Related Litigation

Stephen Hans & Associates has assisted employers for more than two decades with employment issues, including lawsuits involving tipping credits and tipping pools.

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