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.
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 customarily and regularly 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 $5.13 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.
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 $5.13
- Earning below minimum wage ($13.00 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.
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, Marlton & Newark wage and hour lawyers at McOmber McOmber & Luber, P.C. have been representing clients since 1974. Contact us today for a free consultation.