The Pros And Cons Of Tip-Sharing

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Proposed Changes Regarding Tip-Sharing Both the federal Fair Labor Standards Act (FLSA) and New York law set out wage requirements for employees. Specific rules govern employees who earn tips since the nature of how they are paid is so different than traditional hourly employees—specifically, the rules regarding tip-pooling, which is the practice of the employer requiring tipped employees to pool and share their tips. The Department of Labor (DOL) recently proposed new changes to the tip-sharing rules under FLSA. The following will examine how the federal rules may change and how any effective changes may affect New York City waiters and other tipped employees. Current Tip-Pooling Laws When it comes to tipped employees, employers have two…show more content…
One exception to this rule is a valid tip-sharing agreement, in which an employer requires the tipped employees to share tips among other tipped employees. Before 2011, certain employers were allowed to collect tips from tipped employees and distribute them to any employees they wished—including back-of-the-house employees and others who do not traditionally receive tips. In 2011, the DOL began enforcing a rule that no employer had the right to share tips with non-tipped employees and that such tip-sharing would constitute wage theft. In recent years, many restaurants have been sued for such wage theft stemming from wrongful tip-sharing, including acclaimed restaurateur Mario Batali, who settled a class action lawsuit for about $5.25…show more content…
The rule states that employers can distribute the tips as they choose—which could also mean pocketing the tips for themselves. This means that managers and others who may not deserve them may take and share hard-earned tips. In addition, the majority of restaurant employees do not work in high-end establishments but in chain restaurants with lower-cost menus. These employees do not earn a significant amount in tips and they often rely on their tips to pay their bills. The new rule could deprive many such employees of a substantial portion of the tips they earn. New York Restrictions on Tip-Sharing The good news for tipped employees in New York City is that even if the new DOL rule goes into effect, they will likely see little change due to more restrictive state laws. New York law allows tip-sharing and tip-pooling, but only between employees who provided direct customer service and other tipped employees. State law does not allow employers to distribute tips among management or other traditionally non-tipped employees. For this reason, any New York tipped employees who believe their tips are being wrongfully shared should discuss the possibility of a wage theft claim with an experienced New York City employment law firm as soon as

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