Tip Pooling in New Jersey

Written by Ravi Sattiraju on August 12, 2017

Tip pooling has become a common concern among employees in New Jersey and New York. However, the term may not carry a lot of meaning for individuals who have not dealt with matters of employment law in retail establishments. As such, our experienced New Jersey employment law attorneys want to address some frequent questions and concerns about tip pooling. What is tip pooling? In what types of industries do we usually see tip pooling? Is tip pooling legal in New Jersey? If you are an employee who works somewhere that engages in tip pooling, is it possible that you were paid unfairly as a result? And if you were paid unfairly, can you initiate a lost wages claim?

All of these questions are significant ones to address. In addition to answering your questions, we will also address some of the pros and cons of tip pooling.

What is Tip Pooling, and Is It Legal?

Tip pooling refers to a practice in which employees at an establishment engage in the practice of gratuity splitting, and they do so by pooling tips together and having each employee take a proportionate share of the tips. Under New Jersey law (New Jersey Admin. Code 12:56-8.4), tip pooling is legal “provided there is an agreement in advance with the employees.” The state law clarifies that, “in order to facilitate the administrative handling of gratuity allowances,” an employer “may establish an average value of gratuities received by an employee based upon a percentage of gross sales apportioned on basis of hours worked among the employees being tipped.”

In other words, tip pooling is legal, and it tends to occur most often in the restaurant industry (as well as other hospitality industries) in which employees receive a portion of their pay through tips. While tip pooling is legal in certain circumstances, employers that engage in tip pooling still may violate New Jersey state laws or federal laws, such as the Fair Labor Standards Act (FLSA), which has requirements for minimum wages and hourly pay.

Can I File a Lost Wages Claim Because of Tip Pooling?

There may be a couple of different issues that can allow employees to file lost wages claims as a result of tip pooling. For example:

  • Employee did not agree to a tip pooling policy; or
  • Employer pools tips and distributes them among employees who usually receive gratuity as well as among employees who do not usually receive gratuity (potentially resulting in federal a wage violation concerning minimum wage).

Tip pooling also may be the basis for other employment law claims. An employee who believes she was aggrieved because of an employer’s tip pooling policy should seek advice from a New Jersey employment law attorney.

Pros and Cons of Tip Pooling

If tip pooling works as it is designed to work, it can be beneficial when it comes to ensuring that all employees are paid a proportionate amount of an establishment’s tips. Tip pooling, in some circumstances, might ensure more equality of pay among the employees.

At the same time, however, there are limitations to tip pooling. For instance, certain employees might engage in harder work or additional work for which they receive a particularly high tip. If the business engages in tip pooling, then that employee might be denied a tip that she or he earned.

Contact a New Jersey Wage and Hour Dispute Lawyer to Discuss Your Case

If you work in the hospitality industry in New Jersey and believe you were paid unfairly as a result of tip pooling, you may be able to file a lost wages claim. An experienced New Jersey wage violation attorney can help. Contact the Sattiraju Law Firm, P.C. for more information.

Posted Under: New Jersey Employment Law
Tags: