The NY Post is reporting this morning that a top restaurateur is “throwing in the apron,” saying he’s done with New York City because a wave of vicious lawsuits, coupled with draconian state regulations, threatens to cripple the industry.
Food Court previously addressed a change in NY’s tip law. Since that time, according to the NY Post, the flood gates of litigation have opened. As a restaurant owner what should you know? Here are a few updates to help bring your regulatory house to order.
Spread of Hours Pay
Employees may be entitled to an extra hour of pay when their work day spans more than ten hours.
Under New York law, a restaurant worker whose workday is longer than ten hours must receive an extra hour of pay at the basic minimum hourly rate (i.e. $7.25) in addition to pay for the actual hours worked. For example, let’s say a waiter works a double shift, the first shift running from 12:00 a.m. to 3:00 p.m. and the second shift running from 6:00 p.m. to 11:00 p.m. That waiter is entitled to eight hours of pay for the shifts he worked plus one extra hour of pay at minimum wage because his start to finish time (the “spread of hours”) of his workday exceeded ten hours.
Service Charge vs Administrative Charge
A “service charge” or fixed gratuity belongs to the waitstaff.
Section 196(d) of the New York Labor Law provides that an employer or his agent cannot accept “any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee.” The New York courts have interpreted this provision to mean that a restaurant cannot add a “service charge” or gratuity to the bill without passing it on to the waitstaff. However, if the restaurant clearly conveys to the customer that the charge is not going to the waitstaff (e.g., by referring to it as an “administrative fee”) then the restaurant is allowed to keep all or a portion of the charge, but not any additional amount the customer intends for the waitstaff.
Restaurants can require waiters to split their tips from customers with other front of the house employees who provide personal service to customers as a principal and regular part of their duties (i.e. bussers, bartenders, barbacks, food runners, captains who provide direct food service to customers, and hosts who greet and seat guests). Restaurants cannot, however, require these employees to share their tips with non-service employees who do not customarily and regularly receive tips, such as dishwashers, cooks, chefs, janitors, and managers.
Restaurants can institute either a tip share or a tip pool as a means of distributing tips. A “tip share” is where the directly-tipped employee shares his or her tips with other eligible workers who participated in providing service to customers. This can be voluntary or the employer may set the percentage which is to be distributed. However, the employees must handle the transactions themselves. In addition, employees cannot be forced to share more than a “customary and reasonable” portion of their tips.
A “tip pool” is an arrangement whereby directly tipped employees pool their tips, which are then distributed among eligible directly and indirectly tipped employees who provided service to customers. Employees may voluntarily and mutually agree to pool their tips, or the restaurant may impose a tip pool on its staff and set the percentage to be distributed to each occupation from the pool, so long as only food service workers receive tips from the pool.
To maintain any defense keep proper records of when employees worked and in what role they worked. Failure to keep proper records could destroy any defense to a potential lawsuit.
Leave a comment