New York gratuity laws require management to keep detailed records of server tips.
If you're a server, bartender, bus-person or hospitality service worker in the state of New York, you might recognize some changes in your company policies regarding tip reporting, pooling, sharing and allocation. As of Jan. 1, 2011, New York has made significant changes in the way restaurant gratuities are handled. Restaurant owners were given until Feb. 1, 2011, to become compliant. However, all changes to company policies were required to be retroactive to Jan. 1.
Tipped-Employee Minimum Wage
One of the changes made to New York state labor laws was an increase of the mandatory hourly minimum wage rate. The minimum rate of pay for tipped food service workers was increased from $4.65 to $5 per hour. The minimum wage for service workers in the hospitality industry -- such as hotel employees -- was raised from $4.90 to $5.65.
Tip Credit
As of 2011, the minimum wage for nontipped employees in the state of New York is $7.25 per hour. The new gratuity laws imposed on Jan. 1, 2011, state that New York restaurant owners have the option to imply a "tip credit," which allows them to pay servers $5 per hour, based on the theory that service workers will earn at least $2.25 per hour in tips. Essentially, the tipped employee wage of $5 combined with a projected $2.25 per hour in tips would equal the state required $7.25 per hour.
Tipped Employees
As the name implies, tipped employees are generally Front of the House employees who receive voluntary cash tips and mandatory gratuities -- usually 15 to 20 percent of a guest check -- from patrons. Such workers include bartenders, servers, bus-staff and sommeliers who perform their duties on the main floors and dining rooms of the establishment. Basically, employees with direct interaction with customers. New York gratuity laws require that all tips collected, pooled or allocated are subject to taxation and must be recorded by restaurant management.
Tip Pooling and Documentation
New York gratuity laws require restaurant owners to organize and enforce tip pooling, allocation and reporting systems and maintain detailed documentation. Though there is flexibility in the way tips are handled, restaurant management is responsible for setting up and enforcing tip-sharing policies. For example, management may impose a tip-pooling plan in which all server and bartender tips are collected and allocated in predetermined percentages to service staffs. In other scenarios, servers may be allowed to allocate a regulated percentage of their tips to busboys, bartenders and hostesses, proving that tip earnings and contributions are recorded by management.
Employer Liability
According to the new laws, the New York State Labor Department required restaurant owners to retain all records of employee tip pooling and allocation activities for a period of at least six years. The department reserves the right to examine such records on its own accord or in association with investigations initiated in response to complaints of misappropriated tips and gratuities within the six-year period.
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