New York 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 York.

When Were the Tip Laws Last Updated in New York?

Tip laws in New York were updated in January 2024.

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

Yes, New York has laws in place that differ from the regulations under the FLSA. The state minimum wage is higher than the federal rate, so employers must adhere to the state hourly rate. Employers may apply a $2.50 tip credit to service employees and $5.00 to food service workers in the state. New York City and Long Island and Westchester Counties have different requirements (outlined below).

Who Holds the Ownership of Tips in New York?

Under state law, any gratuities paid to employees are their property. Employers are not permitted to keep tips.

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

A tip given to an employee via credit card must be paid out no later than the next regularly scheduled payday.

What are the Tip Pooling Rules in New York?

Employers in New York are allowed to establish mandatory tip pools. Eligible employees share a portion of their tips, which are distributed among the group. However, if employees form tip pools on their own, they determine the percentages of tips shared among participants. The sharing percentage in a required tip pool is determined by the employer.

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

Tipped employees (service workers and food service employees) are allowed to participate in tip pools. Managers and supervisors are generally forbidden, although an exception is in place for those with limited supervisory duties and are regularly serving customers.

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

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 York?

Employers in New York are permitted to subtract the pro-rated share of a credit card charge imposed by the company.

Do Tips Count Toward the Minimum Wage in New York?

Yes, the tip credit can count toward minimum wage.

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

Any eligible employee working over 40 hours in a week should receive overtime pay (1.5 times their normal hourly wage). However, a tipped employee’s overtime wage is based on the state amount, not the hourly rate that includes a tip credit.

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

Yes. New York City and Long Island and Westchester Counties have different rules regarding the amount of tip credit that can be used.

In New York City, the tip credit for service employees is $2.65 and for food service workers is $5.35. Both Long Island and Westchester Counties impose the same tip credit limits.

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

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 York?

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

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

Violating New York tip laws can subject an employer to a penalty of up to $1,162 per violation. Civil penalties and legal fees may also apply. An employer could face a daily fine for failing to provide written notice to new hires about tip credits and wage rates.

Managing the regulations associated with tips in New York 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.

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