New Restaurant Tip And Wage Laws In New York

Rosemarie Ingleton left a $110.40 tip on a $552 check at Indochine on Wednesday night, after making an ineffable calculation based on ambiance, food and, of course, service. But she did not give a lot of thought to how it would be distributed among the staff.

“At a place like Indochine, where there are so many people attending to you, my assumption is that they’re sharing the tip at the end of the night — I’m hoping,” said Dr. Ingleton, a Manhattan dermatologist. “But I don’t really know.”

Few diners do, simply associating the tip they leave with the waiter who takes their orders. But how those tips are shared has become an increasingly contentious issue in the industry, stoking resentments among some workers and prompting a recent raft of lawsuits against some of New York’s most lauded dining rooms.
And now, restaurant managers are scrambling to comply with a new set of state labor regulations — issued two weeks ago and put into effect on Saturday — that for the first time seeks to clarify how restaurants should handle tips. In an acknowledgment of the time crunch, state labor officials are giving restaurants until the end of February to put changes in place, but they must be retroactive to Jan. 1.

“Never before were there any regulations regarding tips in New York State,” except for a mysterious paragraph in a 1968 law that barred employers from appropriating tips, said Jean Lindholm, a supervising labor standards investigator at the State Department of Labor. An inconsistent mixture of Labor Department opinions and lawsuit judgments has governed industry practice through the years, she said, adding, “It was time, long overdue, to clarify the rules.”
The new regulations apply to workers in restaurants and hotels and cover a number of issues, including who should pay for laundering “wash-and-wear” uniforms, like special T-shirts. The rules also raise the minimum wage for tipped employees, to $5 from $4.65 an hour for food service workers and to $5.65 from $4.90 an hour for service workers, a category that includes coat check workers in a restaurant or porters in hotels. (There is a separate minimum for workers at resort hotels.)
The new rules also define the job categories that are eligible for shares in tips from the dining room: food service workers only, including waiters, bartenders and bussers, as well as sommeliers and hosts, provided they are not managers.

The new rules allow restaurants to dictate both the system and the percentage allocated to each job category. Gratuities can be combined in a pool, to be divided by all the staff members who have helped a team effort. Or, individual servers can collect their own tips and give portions, or shares, to members of the team.
The Labor Department will require that employers keep records of tip pools and shares; the records could be examined during investigations undertaken by the department on its own or in response to complaints.
The department can compel a restaurant to pay money owed to employees going back six years. In addition, failure to comply with the rules can make a restaurant vulnerable to a lawsuit, something restaurateurs are especially wary of these days, given how aggressively some lawyers and workers’ advocates are pursuing cases.

The way tips are currently shared varies widely, and the arrangements can seem as complex as a Thomas Keller recipe, even at relatively small or casual spots. Some restaurants, like the Stanton Social, a clubby establishment on the Lower East Side, spread the wealth by percentage at the end of the night, while others, like Indochine, assign a number of points to each job, calculate the value of each point depending on the total amount of tips and then distribute the money accordingly.

There are also different ways of including the bar; at some restaurants, bartenders collect their own tips as well as a share of those from the dining room, while at others they do not. And some places have waiters tip others based on a percentage of their sales, rather than their gratuities.

“Generally, the larger the restaurant — meaning more seats, more employees — the greater the chance for a system that is inequitable but easy,” said Chris Fehlinger, the manager and maître d’hôtel at Peasant, in NoLIta, who has worked at restaurants including Nice Matin, Babbo and Union Square Cafe.

“The percentage of sales,” Mr. Fehlinger said, “is very easy for a manager to just run a report through a computer and say, ‘O.K., here’s what you should tip out.’ But it’s not necessarily fair.”
Higher-end, full-service restaurants tend to favor the pooling of tips, because it breeds less squabbling over stations and shift assignments, provides an incentive for teamwork and encourages the servers to police their own performance.

The new regulations generally limit the pool to service workers in the dining room who interact with customers directly — like waiters — or indirectly, like servers who ferry plates from the kitchen to a station where another server picks them up and delivers them to the table. But bartenders, who prepare beverages for the dining room in a role analogous to that of a cook, can also share in the tip pool, even though kitchen staff members cannot. “A lot of this arises from custom and tradition,” Ms. Lindholm said. “If you’re looking for perfect logic in this, it isn’t there.