Court Rules that New York Restaurant Violated Tip-Credit Rule

Court Rules that New York Restaurant Violated Tip-Credit Rule

NEW YORK — A New York Federal Court sided with an employee and ruled in his favor against his employer in a wage suit brought under the Fair Labor Standards Act (FLSA). The plaintiff, Haas Khereed, was a former server at Wallflower, a New York City restaurant, who claimed that the company failed to provide adequate notice that it was applying tips to his minimum wage. Although Khereed initially brought the suit as a class action, he did not ask for the class to be certified and moved for summary judgment solely on his behalf. The court granted summary judgment as to his tip credit claim.

Tip-Credit Rule

Under FLSA and the New York Labor Law, an employer may pay less than the minimum wage to certain tipped employees if they make up the difference in tips from customers. FLSA permits employers to claim a tip credit towards meeting their minimum wage obligations for any employees in a valid tip pool which must be equal to the difference between the required cash wage (at least $2.13) and the federal minimum wage ($7.25). Therefore, the maximum tip credit that an employer can claim under the current minimum wage is $5.12 per hour for each tip-eligible employee. Tipped employees are those who customarily and regularly receive more than $30 per month in tips and are usually involved in customer service positions. These employees can be part of a tip pool – if even a single employee who does not customarily and regularly receive tips is included, it may invalidate the entire tip pool. If an employer creates a tip pool, then it must notify tipped employees of any required tip pool contribution amount and may only take a credit under FLSA for the amount of tips each eligible employee ultimately receives.

Under New York Labor Law, in order to claim the tip-credit allowance, employers must include specific information on employee wage statements about the tip allowance. Specifically, the wage statement must expressly identify the per-hour amount of a tip credit and the total amount of the tip-credit allowance.

Plaintiff’s Allegations

Khereed claims that his wage statements failed to include tip allowance information required by New York Labor Law. Specifically, New York Labor Law requires wage statements to include allowances claimed as part of the minimum wage. Even though his wage statements provided information regarding his tipped-employee hourly rate and the amount of tips he earned, the law still requires the employer to expressly identify the per-hour amount of the tip credit and the total allowance taken. If wage statements are inadequate, the employer is subject to statutory damages of $100 per work week, not to exceed a total amount of $2,500.

A tip pool may be permitted under FLSA, employers need to ensure that they satisfy federal and state notice requirements. You should call (855) 754-2795 or complete the Free Unpaid Overtime Case Review form on the top right of this page if you or a loved one suspects that your employer is denying you of your wage rights. Our top-rated team of wage lawyers will evaluate your situation to determine your best course of action. We will also determine if it is in your best interest to file a lawsuit against your employer. There are strict time limitations for filing, so it is important that you call our experienced attorneys today.

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