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In the service industry, employee tips often form a significant portion of an employee’s income. However, there have been concerns raised about employers using employee tips to balance shortages on a cashier’s draw.

Our New York City employment attorneys at The Samuel Law Firm will explore the legality of such practices under New York State and federal law, shedding light on the rights and protections afforded to employees in these circumstances.

Employee Tips

To understand the legal framework surrounding employee tips, it is essential to consider both federal and state regulations. Federally, the Fair Labor Standards Act (FLSA) sets guidelines for tip-related matters. At the state level, New York has specific laws governing the handling and distribution of employee tips.

Tip Pooling and Tip Credit in New York State

Tip pooling refers to the practice of collecting tips from employees and redistributing them among a group of workers. New York State law generally allows tip pooling as long as it is fair and reasonable. However, it is crucial to note that not all employees are eligible to participate in a tip pool.

Additionally, tip credit is a provision under which employers may pay tipped employees a lower cash wage as long as the tips they receive make up the difference to meet the minimum wage. It is important to understand the implications of tip credit when considering the use of employee tips to balance cashier shortages.

Employee Tips and Cashier Shortages: Federal and State Perspective

Under the FLSA, employers are explicitly prohibited from using employee tips for any purpose other than applying tip credit toward the employee’s minimum wage obligation. This means that employers cannot retain employee tips for themselves or use them to offset cashier shortages.
New York State law reinforces the protection of employee tips. Employers are not allowed to deduct or retain any part of an employee’s tips except when applying for a lawful tip credit. As a result, using employee tips to balance cashier shortages would generally be considered illegal in New York.

Employers who violate tip protection laws may face various consequences, including legal action, monetary penalties, and potential reputational damage. It is crucial for employees to be aware of their rights and seek legal remedies if their tips have been unlawfully withheld or used.