Tip Skimming

What is Tip Skimming?

The unlawful practice of tip skimming, which is often overlooked, is a significant problem in the food service industry. Tip skimming refers to the unlawful practice of restaurant owners or managers taking a portion of tips that belong to the restaurant’s employees. Tip skimming normally coincides with tip-pooling, the practice of sharing tips between the staff, including servers, waiters, bartenders, chefs, and dishwashers. When tip-pooling is utilized, owners and managers can easily skim tips from the pool without employees’ knowledge. Some owners and managers also attempt to conceal their tip skimming in pay-stub deductions labeled “meal credits” or “admin fees”.

Victims of tip skimming are unlawfully underpaid, disenfranchised, and taken advantage of by management. Employees in the food industry work hard, long hours to provide for their family and deserve to be paid their duly earned wages and tips.

Federal and State Law

Wage and tip laws are governed by the United States Department of Labor and the New Jersey Department of Labor and Workforce Development. The combination of federal and state wage laws make it illegal for a restaurant employer to share in tips, withhold wages and tips, skim tips, and pay employees under minimum wage.

Minimum Wage

All New Jersey workers are required to earn minimum wage. There is an exception for tipped employees, especially those who work in the food and service industry. The legal definition of a tipped employee is one who usually receives at least $30 in tips per month. An employee who typically receives more than $30 in tips over a one-month period but occasionally does not is also considered a tipped employee.

In New Jersey, employers may count part, or all, of an employee’s tips toward the minimum wage requirement. This means the employer may pay less than the minimum hourly wage if the employee’s tips make up the difference. However, employers cannot pay below $5.26 per hour, which is called the cash wage. At the end of the workweek, if the tips are not enough to equal minimum wage for each hour worked, then the employer is responsible for paying the difference.

The maximum tip credit and cash floor allowed under the NJ Wage and Hour Law is scheduled to increase annually through 2024.

Warning Signs

While it can be hard for restaurant employees to spot tip skimming, being aware of the tell-tale warning signs can be your first line of defense:

• An hourly wage below $5.26
• Earning below minimum wage ($15.13 per hour in New Jersey)
• Significant and unclear payroll deductions
• Unclear, confusing, or “fly-by-night” tipping procedure
• Tipping procedure that changes frequently
• Meal deductions that are greater than the cost of the food

McOmber McOmber & Luber, P.C.’s team of attorneys can review your unique situation and help determine if you are a victim of tip skimming.

Steps You Can Take Against Suspected Tip Skimming

Keeping detailed records of your hours and tips, along with any mistakes or discrepancies that appear with your paychecks, is an excellent way to detect questionable practices and provide evidence of what you should be making.

It is also a good idea to speak with your coworkers about the situation. If they have noticed the same warning signs, there may be a case for tip skimming, and an opportunity to confront your boss about it with a united front.

However, be aware that not every instance of suspected tip skimming is due to malicious actions taken by management. Sometimes, pay discrepancies are simply accidents, such as digital glitches or bookkeeping errors. In cases such as these, you may wish to speak to your supervisor regarding your findings, as they may be able to rectify the situation immediately, especially if it was an honest mistake.

Unfortunately, when it comes to cases of malicious or unlawful tip skimming, often the only way to recover what you are owed is through legal action.

Legal Remedies to Recover

If you are a tipped employee and believe your restaurant illegally tip-skimmed or withheld your earned wages, McOmber McOmber & Luber, P.C. can help you recover the earnings you deserve. Generally, you can sue your employer for unlawful wages, unfair business practices, fraud, and misrepresentation. Furthermore, certain wage and tip violations can warrant criminal prosecution by the State of New Jersey.

Be aware that, after complaining of tip-skimming, you may be subject to retaliation or adverse employment actions, which can include termination, reduced hours, demotion and more.

Retaliation against an employee who reports labor law violations is illegal, and there are penalties for employers who engage in this unlawful practice, including requiring them to provide you with the pay that you were wrongfully denied.

Tip Skimming Class Action Lawsuits

Class action lawsuits present an opportunity for multiple victims of tip skimming to come together and seek justice as a collective. This approach can be particularly effective when several employees from the same establishment or multiple establishments under the same ownership experience similar unfair practices.

Advantages of a Class Action Lawsuit for Tip Skimming

Some advantages of participating in a class action suit for tip skimming can include the following:

• A Unified Voice: A class action provides employees the ability to speak with a united front, amplifying their voice against a larger entity.
• Cost-Efficiency: Legal costs are distributed among all class members, reducing the financial burden on individual plaintiffs.
• Standardized Settlements: If a settlement is reached or a judgment is entered, it usually benefits all members of the class, ensuring consistency in outcomes.

Of course, there are many more benefits (and risks) that can come from a class action tip skimming lawsuit. Be sure to discuss your options with the attorney before proceeding.

How to Initiate a Class Action Suit for Tip Skimming

If you and your co-workers have noticed a pattern of tip skimming, the steps to initiate a class action might include:

• Gathering Evidence: Compile detailed records of tip skimming incidents, payroll discrepancies, and any other incidents related to wages and tips.
• Consult with Legal Counsel: Engage with an attorney experienced in class action lawsuits and discuss the potential for a case.
• Class Certification: The attorney will seek to certify the group as a class. This requires proving that there are enough plaintiffs with similar complaints for the case to proceed as a class action.

Retaliation Protection for Class Representatives

Those who come forward as class representatives might be worried about retaliation from employers, but class representatives who challenge unjust practices, like tip skimming, are protected by law from employer retaliation.

This means employers cannot fire, demote, reduce hours, or take any negative actions against them for leading or participating in a class action. Violating these protections can result in serious legal consequences for employers, including fines and mandatory reinstatement of the affected employee. If you’re a class representative, you have the right to seek justice without fear of repercussions.

Seeking Legal Counsel and Representation

If you believe that you are a victim of tip skimming, it is imperative to consult with an experienced and reputable employment litigation lawyer. Red Bank, NJ, Marlton, NJ, Newark, NJ, New York, NY, and Philadelphia, PA wage and hour lawyers at McOmber McOmber & Luber, P.C. have been representing clients since 1974. Contact us today for a free consultation.