New York Tip Laws and Requirements
New York's tip laws, updated in January 2024, differ from federal FLSA regulations by requiring employers to adhere to a higher state minimum wage, allowing a tip credit of $2.50 for service employees and $5.00 for food service workers, and imposing distinct rules in New York City, Long Island, and Westchester Counties, while federal law permits employers to take a tip credit only for hours worked in tipped occupations and mandates a minimum cash wage of $2.13 per hour for tipped employees.
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 include 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 difference 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.
Related
Rhode Island Tip Laws and Requirements
Rhode Island's tip laws, updated in June 2022, generally follow federal Fair Labor Standards Act regulations—including the allowance of tip credits and tip pooling—but differ by applying a higher state minimum wage and new tip protections for employees earning over $30 monthly in tips, while federal rules permit employers to take tip credits only for hours worked in tipped occupations and require tipped employees to be paid at least $2.13 per hour.
Alabama Tip Laws and Requirements
Alabama follows federal Fair Labor Standards Act (FLSA) tip laws, which allow employers to take a tip credit against minimum wage only for hours worked in tipped occupations, require tipped employees to be paid at least $2.13 per hour plus tips, recognize that tips belong to employees and can be pooled among eligible workers, and have not enacted any state-specific tip laws differing from federal regulations.
Kansas Tip Laws and Requirements
Kansas tip laws generally follow federal Fair Labor Standards Act (FLSA) regulations, including the allowance of a tip credit against minimum wage for tipped employees, the requirement to pay tipped workers at least $2.13 per hour, the recognition of dual jobs for tip credit application, the permissibility of tip pooling, and the obligation for employers to inform employees about tip credits and cash wages, with Kansas-specific provisions such as exempting cash gratuities from sales tax and aligning its 2021 updates with federal changes.
Connecticut Tip Laws and Requirements
Connecticut's tip laws, updated in September 2020, require employers to comply with the state's higher minimum wage rather than the federal rate, allowing a variable tip credit for tipped employees such as hotel and restaurant waitstaff, while federal regulations under the FLSA set a $2.13 minimum cash wage and permit tip pooling but only allow tip credits for hours worked in tipped occupations, with recent federal rule changes and court decisions affecting these provisions.
Illinois Tip Laws and Requirements
Illinois tip laws, updated in July 2024, differ from federal FLSA regulations by limiting employers to a tip credit of only 40% of the state's higher minimum wage, requiring payment of the difference if wages plus tips do not meet the minimum, while federal rules allow a tip credit based on the difference between a $2.13 hourly wage and the federal minimum wage, and permit tip pooling without contribution limits.
Virginia Tip Laws and Requirements
Virginia's tip laws, last updated in September 2021, generally align with federal Fair Labor Standards Act (FLSA) regulations—allowing employers to take a tip credit against minimum wage for tipped employees who earn at least $2.13 per hour, permitting tip pooling among eligible employees, and recognizing that tip credits apply only to hours worked in tipped occupations—while also adhering to Virginia's higher statewide minimum wage, with ownership of tips governed by federal standards.