Owners in the restaurant industry often have questions about tips. As a restaurant owner, it’s important to know your rights and responsibilities regarding tips so you can avoid disputes with employees and not put your business at risk.
The Fair Labor Standards Act (FSLA), which is federal law, and the New York Labor Law (state law) determine how restaurant owners must deal with tips.
In the past, people paid restaurant bills with cash, but today credit cards are a popular and common form of payment.
How must a restaurant owner deal with credit card tips?
When tips are received by credit card, the owner must pay the employee the tip amount due no later than the regularly scheduled payday. Credit card companies charge a fee to the merchant for use of credit cards, and the fee is a percentage of the total amount paid on the card. The employer deducts the pro-rated share of the credit card company charge from the tip when calculating the employee’s tip.
How must an employee’s wage statement reflect wages and tips?
The wage statement must indicate the amount being paid to the employee in wages and the amount paid in tips.
How should employers handle cash tips?
Employers can allow employees to leave their cash tips with the employer during a particular pay period. However, doing so must be voluntary and up to the employee. Employers can hold tips as a service to the employee, and employers would indicate the amount in tips and wages in the wage statement. Employers cannot make their service of keeping cash tips as a mandatory hiring condition or as a condition for continued employment. If employees allow employers to keep their tips, employers must keep a daily record of tips earned by each employee and have the records available for inspection by the employee and/or the NY Department of Labor.
Do You Have Other Questions about NY Labor Laws that Apply to the Restaurant Industry?
Our attorneys at Stephen Hans & Associates are glad to answer your questions and provide legal guidance or representation for disputed employment issues.