Tip Credit Remains For New York Hospitality Employees

2020 will be the last year that employers in New York who employ tipped employees outside of the hospitality industry (nail salons, car washes, etc.) will be allowed to pay rates under minimum wage and take a “credit” for tips received by such employees to satisfy the state minimum wage requirements. This means that beginning in 2021, employers of Miscellaneous Industries and Occupations will be required to pay all employees the full minimum wage, minus any credit for tips employees may have received, but leaving the tip credit for hospitality and nightlife workers unchanged.

Currently, New York State Law allows employers in certain industries to pay tipped employees below the state minimum wage if the employee earns a sufficient amount in tips. This tip credit can only be used if the sub-minimum wage plus tips add up to at least the minimum wage. The current law also keeps employers from withholding employee tips, and this new Tip Credit rule would allow employers that do not take a tip credit to start a “tip pool” to be shared among both tipped and non-tipped worked, such as the back-house.

This Tip Credit ruling will help do away with what was known as the “80-20” rule, that prevented employers from taking the tip credit when an employee spent too much time performing non-tipped tasks. Eliminating the tip credit for miscellaneous workers helps provide a “more predictable wage floor for tipped workers and would help offset known wage fluctuations due to customer preference, weather, the economy, and seasonality”, and allows for more economic opportunity and advancement for New Yorkers in the hospitality business.