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Jan 04 2011

New Tip Rules In Effect For NY Restaurants and Hotels!

Normally tipping is no more complicated than figuring out whether to leave    15 or 20% of the check based on the service you received (or less or more if the service was particularly bad or good). Well, for restaurant, hotel and bar owners, the NYS Labor Department has issued the first-ever set of guidelines for how tips must be shared by employees and documented by employers.  Having represented many restaurant owners in claims by employees that included improper tip-sharing claims, I can state that this guidance was long overdue.

Previously, courts had to interpret an unclear paragraph from a 1968 regulation that barred employers from taking any of their employees tips.  That was clouded by a long selection of subsequent Labor Department opinions and inconsistent judicial decisions that did not help resolve the flood of wage and hour litigation involving tips.  Here is a summary of  the key provisions of the new Hospitality Wage Order issued January 1, 2011 (effective immediately, though see below for how it will roll out)

I. Minimum Wage

a. Tip Credit Reduced

The NYS Labor Department kept the minimum wage at $7.25 per hour  and overtime is still time and a half for anything beyond 40 hours per week; it did however, lower the tip credit for these classes of workers, effectively raising the minimum wage employers must pay “tipped” employees.  For food service  workers it raised the minimum to $5.00 (from $4.65) with a maximum tip credit of $2.25 per hour (down from $2.60).  Service employees must be paid $5.65 per hour (up from $4.90) with a max tip credit of $1.60 (down from $2.35).  In resort hotels, if tips are at least $4.10 per hour, then the minimum wage  payable is  $4.90 per hour ( up from $4.35) with a max tip credit of $2.35 (down from $2.90). Chambermaids were also merged into this category whereas before they had their own category of hourly wages and tip credits.

In addition, when calculating overtime pay, the employer must first calculate the amount owed on the full rate and then deduct the tip credit.  It is a violation to first deduct the tip credit and then multiply the difference by the  1 1/2 overtime rate.

Here is an example:  A tipped food service worker must be paid $7.25 per hour and the maximum credit that can be applied is $2.25. If that employee works 50 hours in one week, then his salary would be calculated as follows:

Regular rate= $7.25 per hr.    Overtime rate = $10.875 per hr. (7.25 x 1.5)

Wage rate for the first 40hours =$7.25-$2.25 =$5.00 per hr.

Wage rate for the next 10 hours= $10.875- $2.25 = $8.625

Weekly Wages:  $5.00 x 40 = $200. $8.625 x 10 = $86.25 Total =$286.25

You can also just take the tip credit out at the end in this type of calculation:

Wages: $7.25 x 40 = $290.00; $10.875 x 10 = $108.75; Total is $398.75

Tip Credit: $2.25 x 50= $112.50; Total owed is $398.75 – $112.50 =$286.25

b.  Elimination of “weekly, day and piece meal” salaries

All employees in this category must now be compensated on a pure hourly basis, so that the employer can no longer pay on an X dollars per week or per day or per shift basis. This significantly increases an employer’s exposure to overtime claims. The overtime amount is set for all employees at 40 hours per week,  even those in hotels that stay on premises.  Previously these “residential” or “live-in” employees had to work 44 hours to receive overtime benefits.

c. Tip Pooling or Sharing is Now Strictly Regulated

Employers are still allowed to require employees to pool and share their tips.  However, for the first time in NY State, there are a definitive set of rules in place if this  practice is to be put into place. Employers must give written notice to the employees of the tip sharing policy.  The notice must be in English and must be in the primary language spoken by the employee if the Dept of Labor has such notices available in that language. The employer must keep written records of the tips and how they were divided.  Employees have the right to inspect those records. If a charge is automatically placed on the customer’s account, those records must be kept and are subject to inspection by the employee. The employer can charge the employee no greater percentage than the percentage the credit card companies charge the employer for tips placed on credit cards.  All house-imposed charges placed on a guest’s bill that are labeled as a gratuities must be paid in full to the employees.  If the house is going to have any other charge, such as an “administration” or “house ” charge for the administration of a banquet or a catering event, then the guest’s contract and bill must clearly state that this charge is not a gratuity and will not be shared with the employees as a gratuity. If a portion is to be shared, the notice must state which portion will be shared with employees and which portion shall not be shared in clear and precise language.  The regulation even requires that this notification to the customer be in the same size font as the rest of the contract, but in no event can it be smaller than a 12 point font.

Eligible employees are now defined as those that have personal contact with patrons as a principal and regular part of their duty, not merely occasionally or incidentally. The Dept of Labor list of eligible employees includes:

Wait staff, counter staff (who serve to customers), bus persons, bartenders, barbacks, food runners, captains who serve to customers directly, and hosts and hostesses who greet and seat guests. Exempt persons (Managers and administrative personnel) are forbidden from sharing in tips.

The regulations leave for the employer and employees to work out the percentage of the tip received directly by someone that is to be shared with the indirectly tipped employees. The distribution of the tip share or pool must be handled by the employees themselves, though the employer must maintain the records of the share or pool.  The records must be maintained for six (6) years and contain detailed information including the occupations that the employer is including in the tip pool or share and the amounts received each shift by each employee whether in cash or by credit card.

d. Miscellaneous  Provisions

There are other new regulations effecting uniform maintenance pay; spread of hours pay (employees receive an extra hour of pay if there day goes beyond 10 hours no matter how many hours they work during that spread of hours); reimbursement for uniform expenses;  and meal credits (no more than $2.50 credit to be given for an employer provided meal).

e.  When is it Effective?

The rules are effective January 1, 2011, but an employer has until March 1, 2011 to fully implement them.  However, all wages owed must be calculated as of January 1, 2011 and the employee must receive the back pay owed by March 1 or the first pay period following March 1, 2011.

e.  Conclusion

In an effort to make sure that workers in this category get compensated properly, the Dept of Labor has decided to place  the employer in the middle of the employee’s tip pool or share.  The burden is on the employer to keep accurate records and to provide written notice of something that used to be traditionally worked out by the staff among themselves.  If they were happy, the boss was happy.  Now at the end of each shift, someone for management must document who got what and in what fashion. Failure to keep such records would make the employer subject to strict penalties and could expose them to false claims that they or management personnel shared in the tip pool.   Any proprietor of an establishment staffed by these categories of workers needs to re-vamp their employee forms and postings to make sure they are in compliance.

18 comments

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  1. Joan Geary

    Interesting…I have a fill time job and bartend as a second job to make ends meet after a divorce. We have a manager who is saving the owner money by cooking and barbacking as well who is having us give him 2% of our gross sales as a tip at the end of the night….could you comment on this? how does this fall within the NYS labor laws?

  2. Oscar Michelen

    Its complicated because barbacks are listed in the regulations as employees that can share in tips. With a tip pool or tip share, normally its up to the workers at each individual establishment to determine who shares in the pool and at what percentage. The law favors discretion in such matters, and continues to guide such supervisory staff not to participate in the pool unless their presence in that post is a regular part of their workweek. If he just fillsin now and again for conveniec of the house, that should be reflected in his slary and not as a share in the tip pool. He should definitely NOT share in the pool on nights he only manages and does not provide any direct customer service.

  3. john

    Dear Sir,
    Im a waiter and am unwillingly part of a tip pool. Im sharing my tips equal parts w/ 3 bartenders. They earn double my hrly. wage and do not help me w. my duties. We are told to work all together. My sales are double theres, On average I contribute in 75% of the total tips moneys. In summary, Im working for them. Can I legally Opt out of this pool? I’m willing to tip everyone out at the day, but

  4. João Torisco

    Dear Sir.
    I leave in Brasil and I am a Travel Agente.
    I would like to know what are the rules for a check in of minor of age in New York City Hotels.
    Somebody told me that minor of 21 y.o are not able to check in there, but I am not sure.
    Best regards.
    João Torisco

  5. Oscar Michelen

    Dear John: It is unusual that bartenders split tips equally with servers. Do you share in bar tips? You should let your employter know how you feel about the inequality. What your employer has in his estabilshment is a tip pool, which is different from a tip share. “Tip sharing” is when a waiter shares the earned tips with “any employee who participates with the waiter in rendering some personal service to the patron.” New York law specifically permits the sharing of tips by a waiter/server with a buser or “similar” employee. It is commonly understood that tip sharing includes wait staff, bartenders, captains and busing employees. A restaurant owner can compel a waiter to share his/her tips with another “similar” employee. Owners also have the right to require waiters to “tip out” to the rest of the service staff. It does not require an equal share because as discussed below, they do not have the right to force a server to pool his/her tips. Tip pooling is simple: all tip earnings of the service employees are intermingled and then redistributed. A tip pool “must be completely voluntary, initiated by the employees themselves with or without the knowledge of management, and not made part of the terms of hire or conditions of continuing employment.” So your boss cannot force you into a tip pool. Be carefule about how you exercise your rights, however, and document it in writing so that if you are retaliated against for exerting your rights you can protect yourself. These rules only apply if your employment establishment meets the FLSA guidelines. I suggest you contact a lawyer who specializes in plaintiff’s fair labor claims for a free consultation and further information.

  6. Oscar Michelen

    Every hotel has its own rules but normally you need to be over 21 with a valid credit card to check into a hotel primarily because they don’t want to police underage drinking and 21 is the age limit in most US states. I would check with every hotel before booking.

  7. ekryss

    I’ve been working in a restaurant here in Rochester NY for 7 years and they have just instituted automatically deducting 2.5% of our sales (food & beverage) into a tip pool for bartenders bussers and hosts. We had no say in how the tips are to be distributed. When the support staff go home (bussers bartenders and host) and we the servers are still working the floor the 2.5% is still coming out of our sales. Something is not right. The lunch shift the day this started the whole 2.5% went to one person he was bartender and host and servers who did not sell any bar drinks were upset. We used to voluntarily tip out those who performed for us now we are tipping for no service at all. Something is wrong. Management is telling us if we don’t like it we can quit. You can tell we are really valued here. What can we do?

  8. Todd

    Hello–

    I am currently working in a restaurant in NYC where we do a point based tip share. Servers typically get 14 points but the manager has been docking points as a punishment to the servers for different reasons (none of them based on the amount of tips the specific waiter is making). He believes he has the right to give some servers 14 points and others less. Is that legal?

  9. Oscar Michelen

    It may not be. I would need more facts to assess the situation. Email me at omichelen@cuomollc.com

  10. bargirl

    I started to work at a restaurant bar where I’ve been both bartending and serving food and taking food orders…as well as packing their leftovers. I also take all the dirty dishes back and restock new dishes and clean wipe up and set up bar. At first I was told I split tips if I’m working with another bartender which makes sense…but since I’ve been working alone I’m required to give 20% of my tips on busy nights to the owners to ‘cover the cost of them running the dishwasher’. I only get 5.00 an hour as well and don’t always get that paid on time. When they wait tables on the other side of the restaurant I have to make all the drinks and serve the drinks on that side too but I saw a tip share one time because the owners are the servers too and it was a few bucks. I’m getting totally screwed and busting my back sometimes on shifts over 8 hours and my utilities are getting turned off. Time to look for another job I guess…I’m so upset I can’t even afford gas…I’m basically paying to work.

  11. Oscar Michelen

    It is a violation of Federal law (and NY State law) for an owner to share in tips. That’s clear as day. IT is also illegal for an employer to pay $5.00 withotu either making sure that the tips received put the worker back up to the minimum wage or by paying the worker the difference between the money earned and the minimum wage. These are open and shut issues. You should contact a lawyer in your area who deos work in this area of law for advice. Or simply contact your local office of the US or State Department of Labor to report this wage violation. They will handle the rest. Yes you can quit, but the restaurant will only take advantage of the next person down the line. Good luck!

  12. bargirl

    Oscar thank you…I already left they cancelled my shift for the weekend too! So I quit but I AM reporting them big time. There were nights I worked 9,10,11 hours…I could go home with 8 bucks if I was lucky! So they took 20% of my tips if I did ok (ok would be 78 bucks for A 11 hour shift) and on other days where I brought home 8 bucks they never paid the difference between that and min wage. I also paid a few bucks to pay to park if there were no street spots…and they would give me the run around picking up my money. Id waste 20 in gas to pick up pay as they wouldn’t be in when they said to pick it up.

    In the end I am reporting them. Thank you again.

  13. Larrain

    OK, I have a similar problem . Once a month all waitresses are shown a list of tips received based on the sales . I clam every single penny I get and I have been claiming more too because ,my total shows a negative balance . I was informed that it would be reported to the IRS. I am required to initial this document and If I don’t they will hold my paycheck. Also they go by the total of the shift which in 99% of the time the total is carried over by the shift before. Many times it ends up being anywhere from 100 to 150 additional total on my shift. Many times the customer uses a credit card and they do not allow tips to be put on a credit card so I loose that tip. Many times there is no tip at all due to overdone food , moldy food , wait time , customers are intoxicated , among many other factors. I work 3rd shift in a truck stop which is no where near as busy as the 1st and 2nd shift. My base rate is $5.00 per hour and the tips are not shared. I too go home many times with 8 dollars if i am lucky. There is different areas in the restaurant some are booths and some counter. If you are assigned a counter, which has less seats then the booth area you do not make much , but you have to split to total for the day with one other waitress and claim that amount even though you didn’t get much for being at the counter. Why do I have to pay taxes on money I didn’t receive? I am at my wits end …. is this they way a waitress job works? …. I have been looking for another job but haven’t found one. But the more and more I work the farther and farther I get in the hole with IRS. Any feedback would greatly be appreciated.

  14. Oscar Michelen

    Larrain: This is not how waitresses are supposed to be treated. Your employer MUST give you the credit card tips (minus the credit card service fee). Failure to do that violates NYS and Federal law. Your tips also MUST bring your hourly wage up to $7.25 per hour for the whole shift. So if your shift produces insufficient tips to get to that rate, then that violates the law as well if the employer doesn’t make up the difference. You can call the US or NY Dept of Labor’s local office to file a complaint. Also feel free to give me a call at my office today 516 741 3222 to discuss. You can also email me at omichelen@cuomollc.com.

  15. Brendan oflaherty

    Work at a bar/restaurant we had a 25 top party in which my manager had to take due to short staff he’s a good worker and always helps out whenever he can….the parties gratuity was split and he didn’t get a cut but the owner took 25% for the “house”….if he’s the one who worked the party why wouldn’t he be able to recieve some of the gratuity

  16. Oscar Michelen

    The house cannot take any part of a gratuity. They can call it a service charge, but under NY law they must advise the customer that the service charge goes to the house and not the waitstaff. If a manager happens to work as a waiter on a particular night, he can be part of the tip share for sure.

  17. Joel

    Hello,

    I am a bartender in a venue that requires US to tip 1% of our gross sales to the bar backs ? (the bartenders participate in a tip pool amongst themselves) can the establishment dictate to us what percent we have to tip ? It almost seems mandatory (and now our barbacks do less work cause they know the tip is mandatory) This percent is often greater than a tip we would give the bar back based on our actual tips received. (most bartenders usually tip 10%.) And what if individual bartenders that participate in the tip pool decide they don’t want to participate in mandatory tipping and five their own tip to barbacka based on their own individual share of the pool?

  18. Oscar Michelen

    In NY state, owners can dictate the percentages of the tip pool or tip share if they set up the tip program. Employees can dictate the percentages if they are the ones who created it. NYS Dept of Labor has a good FAQ section on tips that you may want to look at to know your rights in this arena. https://labor.ny.gov/legal/counsel/pdf/tips-frequently-asked-questions.pdf

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