Many employees work in restaurants, hair salons and other types of businesses where they typically are tipped by customers. If that describes your job, you probably also spend some of your time at work assigned to tasks where you’re not dealing directly with customers and therefore not getting tips. How does that impact the minimum wage that your employer is required to pay you?
Before we answer that, we need to look at something called a “tip credit.” That’s the maximum amount an employer can deduct from an employee’s minimum hourly wage as long as the wage they pay plus the amount of their tips equals at least the state’s minimum wage. If an employees’ tips don’t reach the tip credit amount, employers are required to pay them the difference to ensure they’re making New Jersey’s minimum wage.
Here in New Jersey, the minimum wage is currently $11.00. The maximum allowed tip credit is $7.87 and the minimum cash wage is $3.13. In 2021, the minimum wage will go up to $12.00, but the maximum tip credit will remain the same. That means the minimum cash wage that employers must pay their employees will be $4.13.
So what happens when an employee spends part of their workday doing non-tipped work? For example, a person who shampoos hair in a salon may be assigned to sweep floors or straighten the stock room occasionally. A waitress may spend part of her workday decorating the restaurant instead of serving customers.
New Jersey has what’s called an 80/20 rule. If an employee spends over 20% of their workday doing untipped tasks, their employer has to pay them the full minimum wage for that period. If a waiter has an 8-hour shift, and spends two hours of it hanging streamers for a party the 80/20 rule would apply. If he spent just an hour doing that, it wouldn’t.
State minimum wage laws can be confusing. It’s incumbent on employers to understand them and apply them correctly. People who rely on tips for a substantial part of their income often simply trust their employers tp do the right thing. Unfortunately, either intentionally or unintentionally, sometimes they don’t.
If you believe that your employer has shortchanged you and made no effort to correct the situation after you’ve brought it to their attention, it’s wise to find out what legal options you have.