Tipped Employees in New York*
Tipped Employees in New York*

Tipped Employees in New York*

Tipped employees in New York may end up receiving less than they’re owed if they don’t understand their legal rights.  Here are some things you should know. 

Is There a Lower Minimum Wage for Tipped Employees?

            Yes, but only if certain preconditions are met.  A common myth is that employers are automatically allowed to pay tipped employees a lower minimum wage, sometimes referred to as a “tipped” minimum wage. The lower “tipped” minimum wage can vary depending on the industry you work in, the nature of your job duties, and your geographic location.

            In most cases employers can only pay a lower “tipped” minimum wage if all of the following preconditions are satisfied:

  1. Under federal law, your employer must give you written or verbal notice of: (a) the amount of your “tipped” minimum wage; (b) the amount being claimed as a tip credit, (c) a statement that the tip credit claimed by the employer cannot exceed the amount of tips you actually receive, (d) a statement that all tips received by you are to be kept by you except for a valid tip pooling arrangement, and (e) a statement that the tip credit cannot be used unless you’ve been informed of these tip credit provisions.

    In addition, under New York law at the time you’re hired your employer must give you written notice of the tip credit amount (i.e., the difference between the minimum wage for non-tipped employees and the lower “tipped” minimum wage) and that extra pay is required if your tips and wages combined don’t at least equal the minimum wage for non-tipped employees. Your employer must also obtain from you a signed receipt showing that you received that notice.
  2. You must be wages for all of the time you worked, and those wages cannot be less than the relevant “tipped” minimum wage.
  3. Your tips and wages combined must at least equal the minimum wage for non-tipped employees.
  4. You cannot spend more than 20% of your workweek performing untipped work.
  5. Your employer or its managers cannot keep any of your tips, or any of the tips from a tip pool.

What if Your Employer Paid you the Lower “Tipped” Minimum Wage Without Satisfying all of the Above Preconditions?

            If your employer paid you a lower “tipped” minimum wage without satisfying all of the above preconditions, then:

  1. Your employer may be liable for paying you the difference between the regular minimum wage and the lower “tipped” minimum wage that it paid you, plus an equal amount known as “liquidated damages.” 
  2. If you worked overtime, your employer probably miscalculated the amount of overtime it owed for any hours you worked in excess of 40 per week, and, as a result, may be liable for unpaid overtime plus an equal amount as liquidated damages.
  3. Your employer may have failed to provide you with accurate wages notices required by the New York Labor Law, and may therefore be liable for an additional amount up to $10,000.
  4. Your employer may be liable for paying your attorney’s fees, plus prejudgment interest on any unpaid amounts at the rate of 9% per year.

Some Questions or Issues That Often Arise in Tip-Related Cases

            Tip-related cases can be complex. The following are some of the issues that often arise in tip-related cases:

  1. Who can be liable as an “employer”?  There are often multiple entities and/or persons who may qualify as your “employers.”  If you file a case, it’s important to name as many of those entities and/or persons as you can.  Why?  Because if you don’t, then there may not be enough assets to satisfy a judgment.  A qualified attorney can help investigate which entities and/or persons may qualify as your “employers.”
  2. What if your boss doesn’t ask you to clock in or clock out each day, or tells you to clock in late or clock out early?  That’s known as working “off-the-clock.” It’s illegal for employers to pay employees for less time than they worked. Some employees think they cannot recover for time spent working “off-the-clock” because they don’t have “proof” of the exact hours that they worked.  But the law requires the employer to track your time worked.  Accordingly, if you weren’t paid for all your time worked, then your employer probably owes you the regular minimum wage for all the time you worked.  If the employer fails to maintain accurate records of when you worked, you may be able to rely on your general recollection to prove the number of hours you worked, even if you can’t recall the exact number of hours worked.
  3. Is “tip pooling” legal?  Tip sharing and tip pooling arrangements are common, and can be perfectly legal.  Generally speaking, the following types of employees are eligible to participate in a tip pool:  wait staff, counter personnel who serve food or beverages to customers, bus persons, bartenders, service bartenders, barbacks, food runners, captains who provide direct food service to customers, and hosts who greet and seat guests.  However, tip sharing or tip pooling arrangements may be illegal if you are required to share your tips with a manager or with employees who don’t have a direct service role. 
  4. What if your employer paid you “off the books”? Some employers pay their employees in cash “off the books.” However, employees paid “off the books” can still sue to recover the unpaid wages and tips that they should have received?
  5. What if you “agreed” to work for less pay than the law requires, or to let your boss or employees with no direct service role share the tips you earned?  Such “agreements” are not legally enforceable, and will not prevent you from seeking to recover unpaid wages or tips.
  6. What if your employer charges customers a mandatory “gratuity,” “service charge” or similar charge for banquets or parties?  If a reasonable customer would understand the amount charged to be a tip substitute, then it must be distributed to the wait staff.
  7. What if you’re not legally in the United States?  You can sue to recover unpaid wages and tips even if you’re not legally in the United States.
  8. Can you sue a current employer to recover unpaid tips and wages?  Yes.
  9. What if your employer retaliates against you for complaining about unpaid tips or wages?  Such retaliation is illegal.  If that happens, speak to a qualified employment lawyer about your rights.
Scott A. Lucas
* This blog is for informational purposes only and is not intended to provide legal advice. The information contained in this blog is provided only as general information and may not reflect the most current legal developments. No representations or warranties are made with respect to the accuracy or completeness of the information contained in this blog, and the blog is not intended to be a substitute for legal advice from a licensed attorney. The information in this blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking professional legal counsel.