How to Tell if your Employer’s Tip-Sharing Policy is Legal

Whether you’re a barista or a bartender, a fast-food worker, or a server at a restaurant, you usually have to depend on tips for part of your earnings. This can be in the form of receiving individual tips or sharing contributions from the tip jar. Your employer may establish a tip pooling policy to distribute tips. They may try to use this to ensure fairness amongst employees, but the policies must comply with specific legal requirements. 

What are the NY Rules about Tip-Pool Participation?

In New York, employers are allowed to require their employees to share tips. The employees who perform (or assist in performing) personal service to customers as a regular and principal part of their job are permitted to be a part of the tip pool. Employees who are partial supervisors may participate if part of their regular and principal job is to perform personal services to patrons, but an employee with substantial supervisory control over other employees can’t participate. 

What is Considered a Tip?

When tipping is voluntary and a customer pays with cash, the leftover amount from the customer that isn’t the actual charge for the product or services (or the tax amount) is the tip. However, it can be more complicated when the customer pays with a card or there’s a mandatory service charge. 

What about Mandatory Service Charges?

Many restaurants will add on a mandatory service charge to the bill for larger parties or special events. The federal law makes it clear that this is not considered a tip. The employer can always keep anything designated as a “service charge” even if the customer doesn’t leave anything on the table and mistakenly thinks that the service charge goes to the server; many states also follow this. Not so in New York, where there is a rebuttable presumption that any additional charges apart from food, drinks, lodging, or other such things, is considered a gratuity that must be passed on to the employees.

If an employer wants to charge an administrative fee that’s not intended to be a tip, this must be spelled out so that the customer realizes that the charge isn’t a tip. Customers must also be informed when the employer distributes part of the administrative charge to their employees but retains the rest; they must be told specifics about what amount of money goes where. 

Are There Other Rules that Employers Must Follow?

New York employers must also comply with federal regulations: 

  • Employers must disclose the tip-sharing policy to employees
  • The disclosure must include any required amounts to be contributed to the pool, how the tips are to be distributed, and whether it’s based on their contribution to total work hours or on job role
  • The combined hourly pay and tips must give employees at least the state minimum wage
  • Employers can only control funds received through tips for the purpose of facilitating tip-sharing or quickly giving out these funds 

What if My Employer has Broken Tip-Sharing Laws?

If you suspect that your employer isn’t following New York’s tip-sharing requirements, then you will likely want to speak to an experienced MOWK Law employment law attorney with expertise in this subject area. They can guide through trying to get damages for the pay that you were denied. Contact us today.