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Summary of difference between federal and state regulations
There are certain instances where employers can pay employees at a rate lower than the minimum hourly wage specified by the federal Fair Labor Standards Act. The most common instance pertains to an employee who earns tips. The employer can deduct the amount of the tips (but only up to a certain maximum amount) from the hourly wage.
New Jersey Revised Statute §12:56 allows a tip credit: the tips and the cash payment per hour must equal at least the current minimum wage.
In August 2020, the New Jersey Department of Labor and Workforce Development (NJDOL) announced new regulations to ensure protections and fair wages for tipped workers. In addition, a document was created to help employers learn their obligations to tipped workers, and for tipped workers to know their rights under the law.
A “tipped employee” is someone who customarily and regularly receives more than $30 per month in tips. State law mandates that tips belong exclusively to employees as part of their wages or as part of a valid tip pool. Tips cannot be used for other purposes, such as paying credit card transaction fees.
On January 1, 2021, the state tipped wage will increase to $4.13 per hour. Employers of tipped workers must either pay them the state minimum wage in full (which will be $12 on January 1), or take a “tip credit” for a portion of their tips while paying them a minimum cash wage. Tip credit plus cash wage must equal the state minimum wage.