N.J. Admin. Code § 12:56-3.5

Current through Register Vol. 56, No. 23, December 2, 2024

Section 12:56-3.5 - Tipped employees

(a) With respect to tipped employees, in determining the minimum hourly wage an employer is required to pay such an employee, only the employer who is paying its employee the minimum hourly wage set forth at N.J.A.C. 12:56-3.1may take a credit for tips received by the employee against that minimum hourly wage (set forth at N.J.A.C. 12:56-3.1) in the following amounts:

1. For January 1, 2019 through June 30, 2019, $ 6.72 per hour;

2. For July 1, 2019 through December 31, 2019, $ 7.37 per hour;

3. For calendar year 2020, $ 7.87 per hour;

4. For calendar year 2021, $ 7.87 per hour;

5. For calendar year 2022, $ 7.87 per hour;

6. For calendar year 2023, $ 8.87 per hour; and

7. Commencing January 1, 2024, $ 9.87 per hour.

(b) The employer who takes a tip credit under (a) above, shall pay to each employee against whom such tip credit has been applied, a cash wage equal to the difference between the minimum hourly wage set forth at N.J.A.C. 12:56-3.1 and the tip credit taken under (a) above.

(c) With respect to tipped employees for whom the employer does not take the tip credit set forth in (a) above, the employer must pay the employee a cash wage equal to the full amount of the minimum hourly wage to which the employee is entitled under either N.J.A.C. 12:56-3.1(employees, generally), 3.2 (employees of a small employer and employees who are engaged in seasonal employment), 3.3 (employees engaged on a piece-rate or regular hourly rate basis to labor on a farm), or 3.4 (training wage).

(d) The tip credit permitted under (a) above may be taken only with respect to those employees whose occupations in the workweeks for which such payments are made are those of tipped employees.

(e) A tip is a sum presented by a customer as a gift or gratuity in recognition of some service performed for him or her. It is to be distinguished from payment of a charge, if any, made for the service. Whether a tip is to be given, and its amount, are matters determined solely by the customer, who has the right to determine who shall be the recipient of the gratuity.

(f) Tips are the property of the employee whether or not the employer has taken a tip credit under (a) above.

(g) The employer is prohibited from using an employee's tips, whether or not it has taken a tip credit, for any reason other than as wages or in furtherance of a valid tip pool; this includes, a prohibition against the employer using an employee's tips to pay any portion, however small, of the fee charged to the employer by a credit card company or other financial institution for the use of credit or debit cards in its business, including the processing of such credit or debit card transactions.

(h) Only tips actually received by the employee as money belonging to the employee may be counted in determining whether the person is a "tipped employee."

(i) In addition to cash sums presented by customers that an employee keeps as his or her own, tips received by an employee include amounts paid by bank check or other negotiable instrument payable at par and amounts transferred by the employer to the employee pursuant to directions from credit customers who designate amounts to be added to their bills as tips. Special gifts in forms other than money, or its equivalent, as described in this section, such as theater tickets, passes, or merchandise, are not counted as tips received by the employee for purposes of this section.

(j) Where employees practice tip splitting, such as where waiters give a portion of their tips to busboys, both the amounts retained by the waiters and those given to the busboys are considered tips of the individuals who retain them. Similarly, where an accounting is made to an employer for his or her information only or in furtherance of a pooling arrangement whereby the employer redistributes the tips to the employees upon some basis to which they have mutually agreed among themselves, the amounts received and retained by each individual as his or her own are counted as his or her tips.

(k) An employer must notify its employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each employee ultimately receives, and may not retain any of the employees' tips for any other purpose.

(l) A compulsory charge for service, such as 15 percent of the amount of the bill, imposed on a customer by an employer's establishment, is not a tip and, even if distributed by the employer to its employees, cannot be counted as a tip received in applying the provisions of this section. Similarly, where negotiations between a hotel and a customer for banquet facilities include amounts for distribution to employees of the hotel, the amounts so distributed are not counted as tips received.

(m) An employee must himself or herself customarily and regularly receive more than $ 30.00 per month in tips in order to qualify as a tipped employee. The fact that he or she is part of a group that has a record of receiving more than $ 30.00 per month in tips will not qualify him or her.

(n) Where an employee is employed in a dual job, for example, where a maintenance person in a hotel also serves as a waiter or waitress, if he or she customarily and regularly receives at least $ 30.00 per month in tips for his or her work as a waiter or waitress, he or she is a tipped employee only with respect to his or her employment as a waiter or waitress. He or she is employed in two occupations, and no tip credit may be taken for his or her hours of employment in his or her occupation of maintenance person. Such a situation is distinguishable from that of a waiter or waitress who spends part of his or her time cleaning and setting tables, toasting bread, making coffee, and occasionally washing dishes or glasses. It is likewise distinguishable from the counter person who also prepares his or her own short orders or who, as part of a group of counter people, takes a turn as a short order cook for the group. Such related duties in an occupation that is a tipped occupation need not by themselves be directed toward producing tips. However, where a tipped employee spends a substantial amount of time (in excess of 20 percent in the workweek) performing related duties, no tip credit may be taken for the time spent in such duties.

(o) The employee must receive more than $ 30.00 per month in tips "customarily and regularly" in the occupation in which he or she is engaged in order to qualify as a tipped employee. If it is known that he or she always receives more than the stipulated amount each month, as may be the case with many employees in occupations, such as those of waiters, bellhops, taxicab drivers, barbers, or beauty operators, the employees will qualify and the tip credit may be applied. On the other hand, an employee who only occasionally or sporadically receives tips totaling more than $ 30.00 per month, such as at Christmas or New Years' when customers may be more generous than usual, will not be deemed a tipped employee. The phrase "customary and regularly" signifies a frequency which must be greater than occasional, but which may be less than constant. If an employee is in an occupation in which he or she normally and recurrently receives more than $ 30.00 per month in tips, he or she will be considered a tipped employee even though occasionally because of sickness, vacation, seasonal fluctuations, or the like, he or she fails to receive more than $ 30.00 in tips in a particular month.

(p) An exception to the requirement that an employee will qualify as a tipped employee under (o) above is made in the case of initial and terminal months of employment. In such months, the purpose of the provision for tipped employees would be fulfilled if qualification as a tipped employee is based on his or her receipt of tips in the particular week or weeks of such month at a rate in excess of $ 30.00 per month, where the employee has worked less than a month because he or she started or terminated employment during the month.

(q) An employer is not eligible to take the tip credit set forth in (a) above, unless it has informed its tipped employees in advance of the employer's use of the tip credit of the following:

1. The amount of the cash wage that is to be paid to the tipped employee by the employer;

2. The amount of the tip credit, which will be claimed by the employer, which amount may not exceed the value of the tips actually received by the employee;

3. That all tips received by the tipped employee must be retained by the employee, except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and

4. That the tip credit shall not apply to any employee who has not been informed of the requirements of this section.

(r) The credit allowed on account of tips may be less than that permitted under (a) above; it cannot be more.

(s) In order for the employer to claim the maximum tip credit set forth in (a) above, the employer must demonstrate that the employee received at least that amount in actual tips. If the employee received less than the maximum tip credit amount in tips, the employer is required to pay the balance, so that the employee receives at least the minimum hourly wage under N.J.A.C. 12:56-3.1with the defined combination of wages and tips.

N.J. Admin. Code § 12:56-3.5

Adopted by 52 N.J.R. 1562(a), effective 8/3/2020