Court Discusses Requirements for Claiming Tip Credit in New Jersey Overtime Wage Case

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Under both state and federal law, New Jersey employers are required to pay their employees overtime wages for any hours worked in excess of forty hours per week. There are certain exceptions to overtime laws that allow employers to evade the duty to pay overtime wages. For example, an employer can use a “tip credit” to count tipped income towards a tipped employee’s minimum and overtime wages. The United States District Court of New Jersey recently explained what notice an employer must provide to an employee to validly claim a tip credit, in a case in which the employer classified certain employees as tipped employees. If you believe you were not fully paid wages for hours you worked in excess of forty hours per week it is essential to engage a trusted New Jersey overtime rights attorney to help you seek any damages you may be able to recover.

The Plaintiffs’ Employment

Reportedly, the plaintiffs worked for the defendant diner as a busser and a server and earned $3.50 per hour and $2.15 per hour respectively, plus tips. The defendant considered employees who earned wages and tips to be tipped employees. While the defendant did not pay tipped employees the minimum wage required under law, it attempted to use a tip credit to count the tips the tipped employees received as income toward the minimum wage. The defendant provided the tipped employees with a form stating it intended to claim a tip credit. In April 2016, the plaintiffs filed a collective action against the defendants alleging New Jersey and FLSA minimum wage and overtime violations, due to inadequate notice of the tip credit. The defendant filed an answer denying that it failed to provide notice to the tipped employees that it intended to claim a tip credit and pay them less than the minimum wage or overtime wages. The plaintiffs filed a motion for summary judgment, arguing that the defendants did not comply with the requirements for claiming a tip credit.

Requirements for Claiming a Tip Credit

Under the FLSA, an employer can only claim a tip credit if it notifies the tipped employee that his or her wage is being reduced under the tip credit provision of the FLSA. Specifically, the FLSA requires that an employer notify the employee of the amount he or she will be paid and the amount of the tip credit the employer will claim, which cannot exceed the value of the tips the employee actually receives. Further, the employee must be able to retain all of his or her tips unless there is a tip pooling arrangement. If the employer does not notify the employee of these requirements, it cannot legally claim a tip credit. The notice requirement is strictly construed and an employer that did not provide the required notice cannot claim a tip credit. In the subject case, the court found that the language in the notice provided to the plaintiffs by the defendant did not notify the plaintiff that the defendant was not permitted to claim a tip credit in excess of the tips an employee received. Thus, the court granted the plaintiffs’ FLSA minimum and overtime wage claims. The court found there was insufficient information to grant the motion as to the plaintiffs’ New Jersey wage law claims, however.

Speak with a Skilled New Jersey Overtime Rights Attorney

If you believe your employer unjustly denied you overtime wages it is critical to engage a skilled overtime rights attorney to assist you in pursuing any compensation you may be owed. The trusted overtime rights attorneys of the Jaffe Glenn Law Group will work diligently to gather facts and evidence in support of your claims to help you seek a successful result. We can be contacted at 201-687-9977 or through our online form to schedule a meeting to discuss your case.