New Mexico Tip Laws

Under the Fair Labor Standards Act (FLSA), tips are regulated. Employers who meet certain criteria are permitted to take a partial credit against minimum wage obligations for tipped employees. Tipped employees includes those engaged in jobs in which they regularly and customarily receive tips.

The tip credit was created by Congress in 1966, and adjustments occurred on December 28, 2021, when the 2021 Dual Jobs Final Rule went into effect. A federal court vacated portions of the final rule in October 2024, which effectively reinstated the original dual jobs regulation (29 C.F.R.531.56(e). It recognizes that an employee may work in tipped and non-tipped occupations, and employers are only permitted to take the tip credit against minimum wage obligations for hours worked in the tipped occupation.

The FLSA mandates that a tipped worker must be paid at least $2.13 per hour. The FLSA tip credit can be equal to the different between the direct (or cash) wage paid to the employee and the federal minimum wage. Only tips actually received by an employee count when making the determination of a tipped employee and applying the credit.

The FLSA also permits employees to “pool” or share tips with other eligible employees, although it doesn’t impose a limit on the amount or percentage of the contribution of each employee in a valid tip pool.

State law may differ from the federal FLSA standards. Review what tip laws apply in New Mexico.

When Were the Tip Laws Last Updated in New Mexico?

The tip laws were updated in New Mexico in 2023 when a minimum wage increase adjusted the allowed tip credit.

Does New Mexico Have Tip Laws That Differ from Federal Tip Laws?

Yes, New Mexico has tip laws that differ from federal laws. Employers are permitted to take the tip credit, but the amount is different due to the higher statewide minimum wage. Employers must adhere to the current rate.

Who Holds the Ownership of Tips in New Mexico?

Under federal law, any gratuities paid to employees are their property. Employers are not permitted to require employees to hand in their tips, although they are allowed to count the tip toward the hourly rate.

What are the Rules for Distribution of Credit Card Processing Tips in New Mexico?

Federal law states that all tips paid by credit card must be issued to employees no later than the next regular payday, even if the employer is awaiting reimbursement from the financial provider.

What are the Tip Pooling Rules in New Mexico?

Employers are permitted to establish mandatory tip pools, but they can only include waitstaff.

Who Can and Can’t Participate in Tip Pools in New Mexico?

Tipped employees (members of the waitstaff) may participate. Supervisors, managers, owners, and non-tipped employees (including cooks, dishwashers, and janitors) may not.

Is there a Difference Between Tips and Service Charges in New Mexico?

Yes, a mandatory service charge is not considered a tip. Therefore, it would belong to the employer.

To be considered a tip instead of a service charge, a customer must give money voluntarily in an amount of their own choosing. The customer must also be able to determine who receives it, and it can’t be set by employer policy.

Can Employers Deduct Credit Card Fees from Tips in New Mexico?

Yes, employers may deduct credit card fees from tips as long as doing so doesn’t take the employee’s hourly wage below the statewide minimum rate.

Do Tips Count Toward the Minimum Wage in New Mexico?

Yes, tips may count toward the minimum wage in New Mexico as long as the employer adheres to the required tip credit vs. cash wage amount.

Do Tips Factor Into Regular Rate Calculations for Overtime Pay in New Mexico?

No, tips don’t factor into rate calculations for OT pay. Any eligible employee working over 40 hours in a week should receive overtime pay (1.5 times their normal hourly wage).

Are There Cities and Municipalities in New Mexico That Have Their Own Tip and Service Charge Rules That Differ from Statewide Laws?

Yes, there are cities and counties with tip and service charge rules that are different from the statewide laws.

• Santa Fe: Adheres to the same minimum tipped hourly wage ($3) but has a higher minimum wage ($14.60)
• Santa Fe County: Requires a higher tipped hourly wage ($4.38) and has a higher minimum wage than the statewide rate ($14.60)
• Albuquerque: Uses the same statewide minimum wage (currently $12/hour) but requires a higher tipped rate ($7.50)
• Las Cruces: Has a slightly higher minimum wage ($12.36/hour) and higher tipped wage ($4.95/hour)

What Are the Record-Keeping Requirements for Employers Regarding Tips in New Mexico?

Employers must keep detailed records of all tips reported by employees, including amounts and dates of service. If tip pooling is in effect, the record should also include the arrangements and the distribution of tips to eligible staff members.

What Options Do Employees Have for Remuneration if Their Tips are Withheld in New Mexico?

An employee may take legal action against an employer who violates state tip laws.

What are the Penalties for Employers for Not Complying with New Mexico Tip Laws?

Violating Maine tip laws can subject an employer to a fine. Employees may also be permitted to recover the unpaid wages in damages. The state also permits that misdemeanor charges may be brought against an employer in violation of tip laws.

Managing the regulations associated with tips in New Mexico can be a challenge. But with WorkforceHub, your business can ensure accuracy. The numerical clock prompt feature allows the employee to input their received tips at the end of the shift, and that information would be available for reporting and payroll processing. Explore our selection of time clocks to find what works for your business.

New Mexico Minimum Wage Information