Tip Theft and Tip Issues

Tip Theft & Tip Issues

In New York City, many servers, bartenders, and hospitality workers rely on tips for the majority of their income. This is due to the tip credit system that New York uses to meet minimum wage obligations. However, some employees do not get to keep all portions of their tips. Sometimes they must enter them into a tip pool to split and share with other employees. This is where tip theft and tip issues can occur.

When done correctly, tip pools are fine. However, employers can take advantage of workers, taking unfair tip credits, failing to notify employees of the tip pooling policies, or even failing to share tips as legally mandated.

As a worker in New York, you should know that all of these issues constitute wage and tip theft. You have rights. Let Brown Kwon & Lam, LLP seek justice on your behalf.

What Constitutes a Tip?

According to the New York State Department of Labor, a tip, also known as gratuity, is “money given by a customer to an employee for service provided to the customer.” Tips can be given via:

  • Cash
  • Check
  • Credit card

Under the law, any charge made to the customer, in addition to charges for food, drink, lodging, and services, is considered a tip. This tip must be given to the employee who provides customer service.

What is a Tip Credit?

The state defines a tip credit as the number of tips earned by an employee that the law allows his or her employer to take as a credit against the minimum wage requirements for that industry.

Tip credits do vary by industry as well as the occupation within the industry. This is why it is so critical employers review the wage orders to ensure that they are following state law.

Minimum Wages for Tipped Employees

Under the Fair Labor Standards Act (FLSA), the federal minimum wage is as follows:

  • Basic Combined Cash and Tip Minimum Wage Rate: $7.25
  • Maximum Tip Credit Against Minimum Wage: $5.12
  • Minimum Cash Wage: $2.13
  • Definition of Tipped Employee by Minimum Tips received: More than $30

In addition, New York’s minimum wage laws for those in the hospitality and food industry are as follows:

  • Minimum Wage: $12.50

For Tipped Food Service Workers:

  • Maximum Tip Credit Against Minimum Wage: $4.15
  • Minimum Cash Wage: $8.35

For Tipped Service Employees:

  • Maximum Tip Credit Against Minimum Wage: $2.10
  • Minimum Cash Wage: $10.40

When an employer fails to meet these state standards, an employee likely has a wage and tip claim.

Understanding the Difference Between Tip Issues: Tip Pooling and Tip Sharing

New York labor laws permit employers to implement tip pooling and sharing procedures for their employees. However, the two are different.

  • Tip Sharing: Employees tipped directly by a customer share their tips with other workers who provided direct customer service. If an employer requires tip sharing, then they may set the percentages of tips shared among food service workers. The employees must handle the transactions themselves. When employees form a tip share on their own, the employees may set the percentages of the tips shared.
  • Tip Pooling: When directly tipped, employees pool their tips and redistribute them among directly and indirectly tipped employees. If the employer requires tip pooling, they may set the percentages of tips shared among food service workers. If the employees form a tip pool on their own, the employees may set the percentages of the tips shared amongst the pool.

When Tip Issues Become Tip Theft in NYC

When a customer lacks tipping etiquette, you may feel like you’ve been cheated out of rightfully earned cash. But unfortunately, tip theft can result from tip issues by the employer, specifically in their practices of tip sharing and pooling.

Be it not giving employees their fair percentage of tips or tip skimming these issues can quickly turn from a mistake to a crime. Tip skimming is an employer’s participation in a tip pool meant for non-management employees.

If you and your coworkers notice tip theft in your New York City place of employment, don’t stay silent.

2021 Miscellaneous Industries and Occupations Wage Order

Starting in 2021, a new order has been implemented to protect tip-earning employees. Employers covered by the state’s Miscellaneous Industries and Occupations Wage Order will now be required to pay all employees the full minimum wage, without any credit for tips employees receive.

The employees will be permitted to receive the full minimum wage directly from the employer and retain all tips. Under the order, the tip credit was reduced by 50 percent on June 30, 2020, and then eliminated on December 31, 2020.

While this is excellent news for New York workers, there is expected to be pushback from employers. And if that occurs, you need justice.

Where Tip Issues Occur

When done correctly, employers should have no issues regarding tip practices in New York workplaces. However, when they neglect industry standards, fail to notify employees of their individual practices, or withhold rightfully earned tips, justice needs to be sought.

If your employer is not paying you your tips, you may have a lawsuit for unpaid wages or tip theft. 


Contact Brown Kwon & Lam, LLP today to meet with a tip theft lawyer.


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