State laws vary on what constitutes a tip, how much employees must be paid, and whether employees are required to contribute to a tip pool. Employers must adhere to either federal, state or local wage and hour laws, whichever is most generous to employees. New Jersey employees who earn tips are subject to New Jersey Wage and Payment Law, which differs from federal law in several respects.
What is a Tip?
A tip is any money a customer voluntarily pays beyond the amount charged for products or services plus tax. Some employers, such as restaurants, add a mandatory service charge to bills for large parties or catered events. This designated service charge allows employers to keep the extra amount paid even if the customer thinks that by paying it, he or she is leaving a tip for an employee.
Employers often choose to share service charges with employees, however they are not required to do so by law. Some states have implemented rules designed to inform the customer about whether the service charge is going to the employer or the employee. New Jersey has not yet implemented such a law; therefore New Jersey employers are not required to inform customers about their service charge policies.
Tip Pooling is Allowed in New Jersey
New Jersey employers may participate in tip pooling, an arrangement in which employees split a portion of their tips with other employees. The federal Department of Labor only allows employees who regularly receive tips to take part in the pool. Employees must receive notice of the pool; cannot be required to contribute more than is customary and reasonable; must be able to keep at least minimum wage; and are not required to share tips with their employers or with employees who do not typically receive their own tips.
New Jersey Employers May Take Tip Credits
Federal law states that tips belong to the employee. Employers may not require employees to relinquish their tips unless state law allows employers to take tip credits or the employee is part of a tip pool. New Jersey allows employers to take tip credits, therefore employers may pay less than minimum wage as long as employees’ tips make up the difference. If the employer’s pay and the employee’s tips together do not equal minimum wage, the employer must pay the employee the amount necessary to equal at least minimum wage for each hour worked.
The current federal minimum hourly wage is $7.25, whereas the minimum hourly wage in New Jersey is $8.44. New Jersey employees must therefore receive at least $8.44 an hour regardless of whether they receive tips. However, New Jersey employers may count all or part of employees’ tips towards its minimum wage obligations. Employers may not take a tip credit for the hours that an employee spends doing untipped work, but rather must pay the full minimum wage.
The current federal rate for tipped employees is $2.13 an hour, an amount also suggested by the New Jersey Department of Labor and Workforce Development. However, New Jersey employers may ultimately decide how much to pay tipped employees if the employee’s combined wage and tips equal at least minimum wage.
Cherry Hill Employment Lawyers at McOmber McOmber & Luber, P.C. Skillfully Handle New Jersey Wage and Hour Claims
If you are involved in a wage and hour dispute, contact an experienced Cherry Hill employment lawyer at McOmber McOmber & Luber, P.C. We handle wage and hour claims in Cherry Hill, Red Bank, Middleton, Marlton and throughout New Jersey.