Some workers earn an hourly service rate, plus tips.
It is legal to pay the hourly “service rate,” which is $3.75 per hour, to tipped employees so long as the employer informs the employees in writing that they will be paid the service rate.
The service rate applies if:
- The worker makes more than $20 a month in tips, and
- The hourly tips plus the hourly service rate add up to the minimum wage over the course of the work week.
Note: If the service rate plus tips does not add up to at least the minimum wage for every hour worked, the employer must pay the difference.
Tip Pooling and Service Charges
Managers, supervisors and owners must never take any part of workers’ tips or service charges listed on a bill.
Tip pooling is allowed, but only for wait staff, service bartenders, and other service employees. If an employer chooses to add a service charge or tip to the bill (as defined by the law), the employer must distribute the proceeds in proportion to the services provided by those employees.
See the Attorney General’s Advisory on