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Wage Theft and Restaurant Workers


Legal content fact checked by Charles E. Joseph

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Wage theft affects millions of restaurant workers. Unfortunately, many servers, hosts, food runners, and bartenders don’t realize that their employer owes them unpaid wages and tips.

Wage theft in restaurants can take several forms, including paying less than the minimum wage, violating tip pool laws, or taking improper deductions from restaurant workers’ wages.

Learn about your rights under federal, New York state, and New York City wage theft laws. If you’ve lost money because of wage theft, reach out to Charles Joseph, an experienced NYC restaurant lawyer, for a free consultation today.


What is Wage Theft?

Wage theft is when employers underpay their employees. For restaurant workers, this can mean making less than minimum wage, not receiving overtime pay, or underpayment of tips.

Wage theft costs workers an estimated $50 billion a year according to the Economic Policy Institute.

Federal, state, and local laws protect restaurant workers from wage theft. As tipped employees, many restaurant workers experience wage theft without realizing it. Illegally withholding tips from servers, for example, qualifies as wage theft. A restaurant lawyer can help workers recover unpaid wages.

Minimum Wage Laws for Tipped Employees

Federal law guarantees that all employees earn a minimum hourly wage. New York laws set a higher minimum wage than the federal minimum wage, and New York City employees benefit from an even higher minimum wage.

If an employer pays their employee less than the minimum wage, that employee can sue for back pay and penalties.

However, minimum wage laws are different for tipped employees. Your employer can pay you less than the minimum wage if you receive enough tips to raise your hourly rate to the minimum wage.

If you don’t receive enough tips during your shift to bring your hourly wages up to the minimum, your employer has to pay the difference.

Employers cannot pay employees solely with tips. If your employer does not guarantee that you make the minimum wage, including tips, this may qualify as wage theft.

Restaurant workers who receive tips can read more about New York tipped employee laws or contact an employment lawyer for a free consultation.

New York Tip Pool Laws

Many restaurant workers receive gratuities, or tips, as part of their compensation. Employers who do not follow tip pool laws are guilty of wage theft.

When customers tip at a restaurant, those tips belong to the restaurant workers, not the restaurant owners. Your employer cannot force to you give part of your tips to the restaurant. But many restaurants use a tip pool to divide tips.

The tip pool can legally only include certain employees. The pool is then divided between qualifying employees (“front of the house”), including wait staff, food runners, bussers, bartenders, and hosts.

Certain restaurant employees cannot be part of the tip pool (“back of the house”). This includes the restaurant owner and any managers. Tip pools usually also exclude back-of-the-house employees like dishwashers, chefs, and other kitchen staff, who typically don’t receive tips.

The laws for tipped employees are complicated. For more, read our page on New York tipped employees.

Overtime Laws for Restaurant Workers

Overtime laws protect employees. Under federal laws, employers must pay time and a half for all hours worked over 40 hours in a workweek.

Under overtime laws, restaurant workers must receive one and a half times their normal wage for overtime hours. This applies to tipped employees as well.

For tipped employees, overtime must be based on the full minimum wage, not the lower tip credit hourly rate.

Employers who do not pay overtime wages, misclassify employees as overtime exempt, or pay a flat rate or shift pay for all hours worked can violate wage theft laws. Employers who violate overtime laws may have to pay back wages, liquidated damages, and penalties. For more, read our page on New York overtime laws.

Mandatory Service Charges

Restaurants and event venues often include a “mandatory service charge” on bills. The service charge may be for large groups, private parties, or catered events.

Employers must distribute the mandatory service charge to restaurant workers or clearly state that it is not a tip or gratuity. Withholding mandatory service charges from restaurant workers counts as a form of wage theft.

Restaurants can only legally keep a mandatory service charge under very specific circumstances. The restaurant must clearly communicate that the mandatory service charge covers administrative costs and is not a tip or gratuity for the servers. If this language does not appear, the mandatory service charge will be considered a tip. Restaurants must then distribute the mandatory service charge to restaurant workers.

Employment lawyer Charles Joseph founded the New York firm that has led the fight against illegal service charges. Joseph’s firm of restaurant lawyers has recovered millions for underpaid NYC restaurant workers. 

Improper Deductions

New York laws protect restaurant workers from illegal deductions from their paychecks.

Your employer can legally deduct income tax or payroll taxes from your paycheck. However, they cannot automatically deduct wages for spoilage or breakage, cash shortages, or a customer’s failure to pay their bill.

For example, employers cannot charge employees for breaking a plate while on shift. Similarly, employers cannot deduct wages for spoiled food from a restaurant worker’s paycheck.

New York labor laws also protect employees when a customer walks out on a bill. Employers cannot deduct the cost of a customer’s bill from the server’s paycheck.

In addition to these improper deductions, employers cannot charge fines for lateness or quitting without giving notice.

Taking illegal deductions from a restaurant worker’s paycheck may also violate minimum wage protections. If the deduction brings your wages below New York’s minimum wage, you may have an additional claim.

Underpaying for Hours Worked

Restaurant workers sometimes conduct work before they officially clock in or after they clock out. Employers must pay restaurant workers for all hours worked, even those before clocking in or after clocking out.

For example, if you arrive at work at 6:00 a.m. to open the restaurant at 6:30 a.m., your employer must pay you for the thirty minutes worked before opening. Similarly, if you close down the restaurant, you must be paid for all hours worked, even after you sign out.

New York Meal Break Laws

Under New York laws, employers must give their employees unpaid meal breaks. However, automatically deducting pay for these breaks may violate the law.

State law grants a 30-minute unpaid meal break for employees who work longer than six-hour shifts covering meal time.

However, employers must pay for the meal break if the employee performs any work tasks during the break time. This can include tasks in the restaurant’s back end or back office, or answering the phone. If restaurant workers perform any work during the break, they must receive their regular wages for that time.

How To File A Wage Theft Lawsuit

What can restaurant workers do about wage theft? They can file a wage theft lawsuit to recover back pay and penalties.

Wage theft costs restaurant workers millions of dollars a year. It also violates the law. If you’ve lost wages at work because of unfair tipping practices or other forms of wage theft, a restaurant lawyer can help.

Charles Joseph has over twenty years of experience as a restaurant lawyer in NYC. Reach out for a free, confidential consultation today.

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Legal content fact checked by Charles E. Joseph

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