Tipped Employees

If you are an employee who earns tips (“tipped employee”) in New York, your pay may be calculated differently to account for the tips you earn. New York State (NYS) law allows employers in most industries to satisfy the minimum wage by combining a “cash wage” paid by the employer with a credit or allowance for tips you receive from customers. A tip credit is a certain amount of money your employer does NOT have to pay you if you make up the amount through the tips you earn. The only industry in New York that does not allow a tip credit to be used is the building services industry.

The amount of the tip credit varies, depending on the industry you work in and the nature of your job duties. Under New York law, your employer must inform you about the tip credit in writing and must keep track of your tips to make sure you earned at least the minimum amount of the tip credit. If you do not earn enough tips in a pay period to make up the difference between the tip minimum wage for your type of job and the regular employee minimum wage, your employer must pay you the difference. The minimum wage for tipped employees also varies in NYS, depending on your geographic location.

Minimum Wage for Tipped Employees: Hospitality Industry

In all instances, the cash wage plus the tip credit must at least equal the New York minimum wage.

For food service workers: 

• In New York City (NYC), the minimum wage is $15.00 per hour. The hourly cash wage is $10.00 plus a $5.00 tip credit, equal to the minimum wage.
• In Nassau, Suffolk and Westchester, the minimum wage is $13.00 per hour. The hourly cash wage is $8.65 plus a $4.35 tip credit, equal to the minimum wage.
• For the remainder of NYS, the minimum wage is $11.80 per hour. The hourly cash wage is $7.85 plus a $3.95 tip credit, equal to the minimum wage.

For service employees at resort hotels:

• In NYC, the minimum wage is $15.00 per hour. The hourly cash wage is $12.50 with a $2.50 tip credit, equal to the minimum wage, provided that the weekly average of hourly tips is $8.40 (the tip threshold).
• In Nassau, Suffolk and Westchester, the minimum wage is $13.00 per hour. The hourly cash wage is $10.85 with a $2.15 tip credit, equal to the minimum wage, provided that the weekly average of hourly tips is $7.30 (the tip threshold).
• For the remainder of NYS, the minimum wage is $11.80 per hour. The hourly cash wage is $9.85 with a $1.95 tip credit, equal to the minimum wage, provided that the weekly average of hourly tips is $6.60 (the tip threshold).

For service employees in restaurants and all-year hotels:

• In NYC, the minimum wage is $15.00 per hour. The hourly cash wage is $12.50 with a $2.50 tip credit, equal to the minimum wage, provided that the weekly average of hourly tips is $3.25 (the tip threshold).
• In Nassau, Suffolk and Westchester, the minimum wage is $13.00 per hour. The hourly cash wage is $10.85 with a $2.15 tip credit, equal to the minimum wage, provided that the weekly average of hourly tips is $2.80 (the tip threshold).
• For the remainder of NYS, the minimum wage is $11.80 per hour. The hourly cash wage is $9.85 with a $1.95 tip credit, equal to the minimum wage, provided that the weekly average of hourly tips is $2.55 (the tip threshold).

Minimum Wage for Tipped Employees: All Other Industries Except Building Service

In all instances, the cash wage plus the tip credit must at least equal the New York minimum wage.

For service employees:

• In NYC, the minimum wage is $15.00. The hourly cash wage is –
  • $11.35 plus a $3.65 tip credit, when the weekly average of hourly tips is at least $3.65; or
  • $12.75 plus a $2.25 tip credit, when the weekly average of hourly tips is at least $2.25, but less than $3.65.
• In Nassau, Suffolk and Westchester, the minimum wage is $13.00. The hourly cash wage is –
  • $9.80 plus a $3.20 tip credit, when the weekly average of hourly tips is at least $3.20; or
  • $11.05 plus a $1.95 tip credit, when the weekly average of hourly tips is at least $1.95, but less than $3.20.
• For the remainder of NYS, the minimum wage is $11.80. The hourly cash wage is –
  • $8.90 plus a $2.90 tip credit, when the weekly average of hourly tips is at least $2.90; or
  • $10.05 plus a $1.75 tip credit, when the weekly average of hourly tips is at least $1.75, but less than $2.90.

For most tipped employees, employers can only pay a lower “tipped” minimum wage if all of the following conditions are met:

1. Under federal law, your employer must give you written or verbal notice of:

• • (a) the amount of your tipped/cash minimum wage;
  • (b) the amount being claimed as a tip credit;
  • (c) a statement that the tip credit claimed by the employer is not more than the amount of tips you actually receive;
  • (d) a statement that all tips received by you are to be kept by you except for a valid tip pooling arrangement; and
  • (e) a statement that the tip credit cannot be used unless you’ve been informed of these tip credit

Also, under NYS law, when you are hired your employer must give you written notice of the tip credit amount (example:  the difference between the minimum wage for non-tipped employees and the lower “tipped” minimum wage), and that extra pay is required if your tips and wages combined don’t at least equal the minimum wage for non-tipped employees. Your employer must also obtain from you a signed receipt showing that you received that notice.

2. You must receive wages for all the time you worked, and those wages cannot be less than the appropriate “tipped” minimum wage.
3. Your tips and wages combined must at least equal the minimum wage for non-tipped employees.
4. You cannot spend more than 20% of your work week performing un-tipped work.
5. Your employer or its managers cannot keep any of your tips or any of the tips from a tip pool.

What if your employer paid you the lower “tipped” minimum wage without satisfying the conditions above?

If your employer paid you a lower “tipped” minimum wage without satisfying all of the above conditions first, then:

• Your employer may be responsible for paying you the difference between the regular minimum wage and the lower “tipped” minimum wage that it paid you, plus additional amounts as determined by law.
• If you worked overtime, your employer may have miscalculated the amount of overtime it owed for any hours you worked in excess of 40 per week, and – as a result – may be responsible for unpaid overtime plus additional amounts as determined by law.
• Your employer may have failed to provide you with accurate wages notices required by the New York Labor Law, and may be responsible for an additional amount up to $10,000 as determined by law.
• Your employer may be responsible for paying your lawyer’s fees, plus prejudgment interest on any unpaid amounts at the rate of 9% per year as determined by law.

Frequent Questions in Tip-Related Cases

Tip-related cases can be complicated, so you should hire a knowledgeable lawyer to help you with these issues. Below are some of the problems that often come up in tip-related cases:

1. Who can be responsible as an “employer?” There are often multiple entities and/or persons who may qualify as your “employers.” If you file a case, it’s important to name as many of those entities and/or persons as you can. Why? Because if you don’t, then there may not be enough assets to satisfy a judgment. A qualified lawyer can help investigate which entities and/or persons may qualify as your “employers.”
2. What if your boss doesn’t ask you to clock in or clock out each day, or tells you to clock in late or clock out early? This is known as working “off-the-clock.” It’s illegal for employers to pay employees for less time than they worked. Some employees think they cannot recover for time spent working “off-the-clock” because they don’t have “proof” of the exact hours that they worked. However, the law requires the employer to track your time worked. If you weren’t paid for all your time worked, then your employer probably owes you the regular minimum wage for all the time you worked. If the employer fails to keep accurate records of when you worked, you may be able to rely on your general memory or records to prove the number of hours you worked, even if you can’t remember the exact number of hours worked.
3. Is “tip pooling” legal? Tip sharing and tip pooling arrangements are common, and can be perfectly legal. The following types of employees are usually eligible to participate in a tip pool: wait staff, counter personnel who serve food or beverages to customers, bus persons, bartenders, service bartenders, barbacks, food runners, captains who provide direct food service to customers, and hosts who greet and seat guests. However, tip sharing or tip pooling arrangements may be illegal if you are required to share your tips with a manager or with employees who don’t have a direct service role.
4. What if your employer paid you “off the books?” Some employers pay their employees in cash “off the books.” Employees paid “off the books” can still sue for the unpaid wages and tips that they should have received.
5. What if you “agreed” to work for less pay than the law requires, or let your boss or other employees (with no direct service role) share the tips you earned? Such “agreements” are not legally enforceable, and will not prevent you from suing for unpaid wages or tips.
6. What if your employer charges customers a mandatory “gratuity,” “service charge” or similar charge for banquets or parties? The reason for some mandatory charges is unclear. If a reasonable customer would understand the amount charged to be a tip substitute, then it must be distributed to the wait staff.
7. What if you’re not in the United States legally? You can sue for unpaid wages and tips even if you’re not legally in the United States.
8. What if your employer retaliates against you for complaining about unpaid tips or wages? Such retaliation is illegal. If that happens, speak to a qualified employment lawyer about your rights.

Legal Editors: Steven Mitchell Sack and Scott A. Lucas, January 2015 (updated June 2020)