General Litigation

New Tip Rules In Effect For NY Restaurants and Hotels!

Normally tipping is no more complicated than figuring out whether to leave    15 or 20% of the check based on the service you received (or less or more if the service was particularly bad or good). Well, for restaurant, hotel and bar owners, the NYS Labor Department has issued the first-ever set of guidelines for how tips must be shared by employees and documented by employers.  Having represented many restaurant owners in claims by employees that included improper tip-sharing claims, I can state that this guidance was long overdue.

Previously, courts had to interpret an unclear paragraph from a 1968 regulation that barred employers from taking any of their employees tips.  That was clouded by a long selection of subsequent Labor Department opinions and inconsistent judicial decisions that did not help resolve the flood of wage and hour litigation involving tips.  Here is a summary of  the key provisions of the new Hospitality Wage Order issued January 1, 2011 (effective immediately, though see below for how it will roll out)

I. Minimum Wage

a. Tip Credit Reduced

The NYS Labor Department kept the minimum wage at $7.25 per hour  and overtime is still time and a half for anything beyond 40 hours per week; it did however, lower the tip credit for these classes of workers, effectively raising the minimum wage employers must pay “tipped” employees.  For food service  workers it raised the minimum to $5.00 (from $4.65) with a maximum tip credit of $2.25 per hour (down from $2.60).  Service employees must be paid $5.65 per hour (up from $4.90) with a max tip credit of $1.60 (down from $2.35).  In resort hotels, if tips are at least $4.10 per hour, then the minimum wage  payable is  $4.90 per hour ( up from $4.35) with a max tip credit of $2.35 (down from $2.90). Chambermaids were also merged into this category whereas before they had their own category of hourly wages and tip credits.

In addition, when calculating overtime pay, the employer must first calculate the amount owed on the full rate and then deduct the tip credit.  It is a violation to first deduct the tip credit and then multiply the difference by the  1 1/2 overtime rate.

Here is an example:  A tipped food service worker must be paid $7.25 per hour and the maximum credit that can be applied is $2.25. If that employee works 50 hours in one week, then his salary would be calculated as follows:

Regular rate= $7.25 per hr.    Overtime rate = $10.875 per hr. (7.25 x 1.5)

Wage rate for the first 40hours =$7.25-$2.25 =$5.00 per hr.

Wage rate for the next 10 hours= $10.875- $2.25 = $8.625

Weekly Wages:  $5.00 x 40 = $200. $8.625 x 10 = $86.25 Total =$286.25

You can also just take the tip credit out at the end in this type of calculation:

Wages: $7.25 x 40 = $290.00; $10.875 x 10 = $108.75; Total is $398.75

Tip Credit: $2.25 x 50= $112.50; Total owed is $398.75 – $112.50 =$286.25

b.  Elimination of “weekly, day and piece meal” salaries

All employees in this category must now be compensated on a pure hourly basis, so that the employer can no longer pay on an X dollars per week or per day or per shift basis. This significantly increases an employer’s exposure to overtime claims. The overtime amount is set for all employees at 40 hours per week,  even those in hotels that stay on premises.  Previously these “residential” or “live-in” employees had to work 44 hours to receive overtime benefits.

c. Tip Pooling or Sharing is Now Strictly Regulated

Employers are still allowed to require employees to pool and share their tips.  However, for the first time in NY State, there are a definitive set of rules in place if this  practice is to be put into place. Employers must give written notice to the employees of the tip sharing policy.  The notice must be in English and must be in the primary language spoken by the employee if the Dept of Labor has such notices available in that language. The employer must keep written records of the tips and how they were divided.  Employees have the right to inspect those records. If a charge is automatically placed on the customer’s account, those records must be kept and are subject to inspection by the employee. The employer can charge the employee no greater percentage than the percentage the credit card companies charge the employer for tips placed on credit cards.  All house-imposed charges placed on a guest’s bill that are labeled as a gratuities must be paid in full to the employees.  If the house is going to have any other charge, such as an “administration” or “house ” charge for the administration of a banquet or a catering event, then the guest’s contract and bill must clearly state that this charge is not a gratuity and will not be shared with the employees as a gratuity. If a portion is to be shared, the notice must state which portion will be shared with employees and which portion shall not be shared in clear and precise language.  The regulation even requires that this notification to the customer be in the same size font as the rest of the contract, but in no event can it be smaller than a 12 point font.

Eligible employees are now defined as those that have personal contact with patrons as a principal and regular part of their duty, not merely occasionally or incidentally. The Dept of Labor list of eligible employees includes:

Wait staff, counter staff (who serve to customers), bus persons, bartenders, barbacks, food runners, captains who serve to customers directly, and hosts and hostesses who greet and seat guests. Exempt persons (Managers and administrative personnel) are forbidden from sharing in tips.

The regulations leave for the employer and employees to work out the percentage of the tip received directly by someone that is to be shared with the indirectly tipped employees. The distribution of the tip share or pool must be handled by the employees themselves, though the employer must maintain the records of the share or pool.  The records must be maintained for six (6) years and contain detailed information including the occupations that the employer is including in the tip pool or share and the amounts received each shift by each employee whether in cash or by credit card.

d. Miscellaneous  Provisions

There are other new regulations effecting uniform maintenance pay; spread of hours pay (employees receive an extra hour of pay if there day goes beyond 10 hours no matter how many hours they work during that spread of hours); reimbursement for uniform expenses;  and meal credits (no more than $2.50 credit to be given for an employer provided meal).

e.  When is it Effective?

The rules are effective January 1, 2011, but an employer has until March 1, 2011 to fully implement them.  However, all wages owed must be calculated as of January 1, 2011 and the employee must receive the back pay owed by March 1 or the first pay period following March 1, 2011.

e.  Conclusion

In an effort to make sure that workers in this category get compensated properly, the Dept of Labor has decided to place  the employer in the middle of the employee’s tip pool or share.  The burden is on the employer to keep accurate records and to provide written notice of something that used to be traditionally worked out by the staff among themselves.  If they were happy, the boss was happy.  Now at the end of each shift, someone for management must document who got what and in what fashion. Failure to keep such records would make the employer subject to strict penalties and could expose them to false claims that they or management personnel shared in the tip pool.   Any proprietor of an establishment staffed by these categories of workers needs to re-vamp their employee forms and postings to make sure they are in compliance.

45 replies on “New Tip Rules In Effect For NY Restaurants and Hotels!”

Interesting…I have a fill time job and bartend as a second job to make ends meet after a divorce. We have a manager who is saving the owner money by cooking and barbacking as well who is having us give him 2% of our gross sales as a tip at the end of the night….could you comment on this? how does this fall within the NYS labor laws?

Its complicated because barbacks are listed in the regulations as employees that can share in tips. With a tip pool or tip share, normally its up to the workers at each individual establishment to determine who shares in the pool and at what percentage. The law favors discretion in such matters, and continues to guide such supervisory staff not to participate in the pool unless their presence in that post is a regular part of their workweek. If he just fillsin now and again for conveniec of the house, that should be reflected in his slary and not as a share in the tip pool. He should definitely NOT share in the pool on nights he only manages and does not provide any direct customer service.

Dear Sir,
Im a waiter and am unwillingly part of a tip pool. Im sharing my tips equal parts w/ 3 bartenders. They earn double my hrly. wage and do not help me w. my duties. We are told to work all together. My sales are double theres, On average I contribute in 75% of the total tips moneys. In summary, Im working for them. Can I legally Opt out of this pool? I’m willing to tip everyone out at the day, but

Dear John: It is unusual that bartenders split tips equally with servers. Do you share in bar tips? You should let your employter know how you feel about the inequality. What your employer has in his estabilshment is a tip pool, which is different from a tip share. “Tip sharing” is when a waiter shares the earned tips with “any employee who participates with the waiter in rendering some personal service to the patron.” New York law specifically permits the sharing of tips by a waiter/server with a buser or “similar” employee. It is commonly understood that tip sharing includes wait staff, bartenders, captains and busing employees. A restaurant owner can compel a waiter to share his/her tips with another “similar” employee. Owners also have the right to require waiters to “tip out” to the rest of the service staff. It does not require an equal share because as discussed below, they do not have the right to force a server to pool his/her tips. Tip pooling is simple: all tip earnings of the service employees are intermingled and then redistributed. A tip pool “must be completely voluntary, initiated by the employees themselves with or without the knowledge of management, and not made part of the terms of hire or conditions of continuing employment.” So your boss cannot force you into a tip pool. Be carefule about how you exercise your rights, however, and document it in writing so that if you are retaliated against for exerting your rights you can protect yourself. These rules only apply if your employment establishment meets the FLSA guidelines. I suggest you contact a lawyer who specializes in plaintiff’s fair labor claims for a free consultation and further information.

Dear Sir.
I leave in Brasil and I am a Travel Agente.
I would like to know what are the rules for a check in of minor of age in New York City Hotels.
Somebody told me that minor of 21 y.o are not able to check in there, but I am not sure.
Best regards.
João Torisco

Every hotel has its own rules but normally you need to be over 21 with a valid credit card to check into a hotel primarily because they don’t want to police underage drinking and 21 is the age limit in most US states. I would check with every hotel before booking.

I’ve been working in a restaurant here in Rochester NY for 7 years and they have just instituted automatically deducting 2.5% of our sales (food & beverage) into a tip pool for bartenders bussers and hosts. We had no say in how the tips are to be distributed. When the support staff go home (bussers bartenders and host) and we the servers are still working the floor the 2.5% is still coming out of our sales. Something is not right. The lunch shift the day this started the whole 2.5% went to one person he was bartender and host and servers who did not sell any bar drinks were upset. We used to voluntarily tip out those who performed for us now we are tipping for no service at all. Something is wrong. Management is telling us if we don’t like it we can quit. You can tell we are really valued here. What can we do?


I am currently working in a restaurant in NYC where we do a point based tip share. Servers typically get 14 points but the manager has been docking points as a punishment to the servers for different reasons (none of them based on the amount of tips the specific waiter is making). He believes he has the right to give some servers 14 points and others less. Is that legal?

I started to work at a restaurant bar where I’ve been both bartending and serving food and taking food orders…as well as packing their leftovers. I also take all the dirty dishes back and restock new dishes and clean wipe up and set up bar. At first I was told I split tips if I’m working with another bartender which makes sense…but since I’ve been working alone I’m required to give 20% of my tips on busy nights to the owners to ‘cover the cost of them running the dishwasher’. I only get 5.00 an hour as well and don’t always get that paid on time. When they wait tables on the other side of the restaurant I have to make all the drinks and serve the drinks on that side too but I saw a tip share one time because the owners are the servers too and it was a few bucks. I’m getting totally screwed and busting my back sometimes on shifts over 8 hours and my utilities are getting turned off. Time to look for another job I guess…I’m so upset I can’t even afford gas…I’m basically paying to work.

It is a violation of Federal law (and NY State law) for an owner to share in tips. That’s clear as day. IT is also illegal for an employer to pay $5.00 withotu either making sure that the tips received put the worker back up to the minimum wage or by paying the worker the difference between the money earned and the minimum wage. These are open and shut issues. You should contact a lawyer in your area who deos work in this area of law for advice. Or simply contact your local office of the US or State Department of Labor to report this wage violation. They will handle the rest. Yes you can quit, but the restaurant will only take advantage of the next person down the line. Good luck!

Oscar thank you…I already left they cancelled my shift for the weekend too! So I quit but I AM reporting them big time. There were nights I worked 9,10,11 hours…I could go home with 8 bucks if I was lucky! So they took 20% of my tips if I did ok (ok would be 78 bucks for A 11 hour shift) and on other days where I brought home 8 bucks they never paid the difference between that and min wage. I also paid a few bucks to pay to park if there were no street spots…and they would give me the run around picking up my money. Id waste 20 in gas to pick up pay as they wouldn’t be in when they said to pick it up.

In the end I am reporting them. Thank you again.

OK, I have a similar problem . Once a month all waitresses are shown a list of tips received based on the sales . I clam every single penny I get and I have been claiming more too because ,my total shows a negative balance . I was informed that it would be reported to the IRS. I am required to initial this document and If I don’t they will hold my paycheck. Also they go by the total of the shift which in 99% of the time the total is carried over by the shift before. Many times it ends up being anywhere from 100 to 150 additional total on my shift. Many times the customer uses a credit card and they do not allow tips to be put on a credit card so I loose that tip. Many times there is no tip at all due to overdone food , moldy food , wait time , customers are intoxicated , among many other factors. I work 3rd shift in a truck stop which is no where near as busy as the 1st and 2nd shift. My base rate is $5.00 per hour and the tips are not shared. I too go home many times with 8 dollars if i am lucky. There is different areas in the restaurant some are booths and some counter. If you are assigned a counter, which has less seats then the booth area you do not make much , but you have to split to total for the day with one other waitress and claim that amount even though you didn’t get much for being at the counter. Why do I have to pay taxes on money I didn’t receive? I am at my wits end …. is this they way a waitress job works? …. I have been looking for another job but haven’t found one. But the more and more I work the farther and farther I get in the hole with IRS. Any feedback would greatly be appreciated.

Larrain: This is not how waitresses are supposed to be treated. Your employer MUST give you the credit card tips (minus the credit card service fee). Failure to do that violates NYS and Federal law. Your tips also MUST bring your hourly wage up to $7.25 per hour for the whole shift. So if your shift produces insufficient tips to get to that rate, then that violates the law as well if the employer doesn’t make up the difference. You can call the US or NY Dept of Labor’s local office to file a complaint. Also feel free to give me a call at my office today 516 741 3222 to discuss. You can also email me at

Work at a bar/restaurant we had a 25 top party in which my manager had to take due to short staff he’s a good worker and always helps out whenever he can….the parties gratuity was split and he didn’t get a cut but the owner took 25% for the “house”….if he’s the one who worked the party why wouldn’t he be able to recieve some of the gratuity

The house cannot take any part of a gratuity. They can call it a service charge, but under NY law they must advise the customer that the service charge goes to the house and not the waitstaff. If a manager happens to work as a waiter on a particular night, he can be part of the tip share for sure.


I am a bartender in a venue that requires US to tip 1% of our gross sales to the bar backs ? (the bartenders participate in a tip pool amongst themselves) can the establishment dictate to us what percent we have to tip ? It almost seems mandatory (and now our barbacks do less work cause they know the tip is mandatory) This percent is often greater than a tip we would give the bar back based on our actual tips received. (most bartenders usually tip 10%.) And what if individual bartenders that participate in the tip pool decide they don’t want to participate in mandatory tipping and five their own tip to barbacka based on their own individual share of the pool?

Hello, I just have a couple questions. My “boss” which is the owner of the restaurant I waitress at, claims he is only going to give me my credit card tips once a month. I don’t see how he could hold my credit card tips for a whole month? Is that illegal? And also there has been days where I didn’t have any tables so I basically worked for a rate of $5 an hour with NO tips. Doesn’t he have to make up for that and pay me min wage? I just think there are thigs that he is doing which seem very unfair and illegal in my point of view.

Under NYS law the tips must be paid in the next pay period and cannot be withheld longer than that. He may deduct the credit card processing fee (around 3%). If your tips do not bring you up to the minimum wage the employer must bring your pay up to the minimum wage. So you are correct that both of those actions are against the law. There may be other things he is doing/not doing that are also contrary to the FLSA and NYS Labor Law. You should file a complaint with the Dept of Labor or contact us at for more info.

Hello sir,

Is the tipped wage credit applied on a per shift basis or over the course of a pay period? If, as a server, I have no tables one day, but then a gangbuster shift the next, is my employer allowed to say that over the long run, I made better than minimum wage all week?

Thank you,

Hello. I’ve been working for a country club type private club in NYC for over 10 years. When we have private parties, 20% gratuity is added to check as stated in party contract. if the total sales for the party are over $2500, 30% of the gratuity is taken out of the tip/our tip pool and paid to management – of which we’re told 10% to GM, 5% each to chef and house manager (salaried employees) and a “mystery” 5% we’ve never been able to clarify – probably owner. This amount is NOT disclosed to the guest. This has been standard practice for at least the last 15 years. Is this legal? Who would I contact to investigate? Also, the waiter who maintains our tip records will not disclose records to other tipped employees. If you ask how much you made on a certain night – especially a banquet party, you are told a number, but have nothing to compare it to – to ensure fair practices. Management routinely goes along with this.

Also, does the spread of hours apply even if overtime is paid in same week? It’s not uncommon to work a double shift that starts at 11am and ends at 1:00-1:30am – 12-14 hour days. Waiters, bussers and runners are required to pay for own uniforms and cleaning. What is the statute of limitations – how far back would a potential lawsuit go on above issues? Whose responsibility is it to provide documentation/proof?

OK so, the best thing to do it go to the Dept of Labor and file a complaint. Service charges that do not go to tipped personnel must be disclosed to guests as such. You have an absolute right to see your tip pool records as well. You can go back three years and perhaps 6 years if you have a State law claim which I think you do. You can also contact me at my firm at 212 448 9933 or email me and we can meet for a free consultation.

Hi! I`m working in busy restaurant in NYC. We`ve the same situation with Amy. When we have private parties we put 20% gratuity. Contract says that 15% is being service charge and 5% is going to somebody else (I don`t remember whom). When our costumer gets check they`re just seeing 20% gratuity. But after the parties we count our tips: 25% from service charge manager cut; net sales minus that cut and only after we share tips between stuff. Everything we claim in our book. we don`t have in our list column “manager”. we just write down how much he got it. Sometimes, manager gets money in 5-7 times more then waiters. Is it legal?

Since 2011, in NY State, the customer must be told that the entire service charge is not going to the servers as a gratuity and must be told what part of the service fee is going to the servers and what part goes to the house. If they are told that in the contract then that’s fine. But if the check says “gratuity” then no its not legal. The check should also indicate its a service fee. Of course, your share of tips must make up any deductions from minimum wage our employer takes because you are a tipped worker. Hope this answer helps

Oscar, thank you for your answer. Our contract says that 15% gratuity for servers and 5% services charge will be added to the final check. But final check has total food, taxes and 20% gratuity. Is it right? I try to understand what the different between gratuity for servers and service change?

I would say no. Calling it a gratuity on the final check will likely make customers think its all tip and not a service charge. A “gratuity” cannot be shared by management; all of it must go to the tipped employees. Management can share in a service charge but it has to be made clear in writing to the customer that the house is getting part of the service charge. You can make an anonymous complaint to the NYS Department of Labor and they will address it.

I have the following situation and don’t know if it is legal or not, I would like your opinion. I work at a high end restaurant. We have “waiters”, “food runners”, “service bartenders”, “back-waiters”, and “hostesses”. Tips are split thus: All tips are totaled into one pool at the end of the night. Hostess receive 4% off the top, service bartender is given 15% of all cocktails, glasses of wine, beer, and soda (NOT bottles of wine). The balance is given to the the waiters and back-waiters. Waiters receive one portion each and back-waiters and runners are given HALF a portion each. On a given night I get $500.00 in tips from guests and will go home with $200-300 after tipping everyone out. Is this legal?

If all the employees have agreed and all of them exceed the minimum wage with this tip structure then this tip pool is likely legal. All the people you list are eligible for tips, hostesses included.

My boss keeps the tips if the cash is short or he gets counterfeit money he says he can keep all tips because we make over min wage and there’s nothing we can do about it to me that’s like making us pay we have no agreement for tip pooling we the employees just spilt tips at the end of our shift who ever works get a cut can he legally do that

Bosses cannot share in tips and he cant take your money to make up for him getting counterfeit money. Because he pays you more than the minimum wage, he can ban tips. He would have to advise his customers on the menu that all tips will be treated as “service charges” that go to the house and not to the servers, then it would be legal. But if a customer believes he is giving you a tip then its yours regardless of what you are earning.I suggest you go to either the Dept of Labor to file a complaint or call a lawyer who specializes in this area to help you out.

I work in a small rest/bar.The owner has paid us $4.65 for the last 8 yrs. He said he never got the memo that it went up to $5 an hr. Can I go back to 2011 to collect that .35cents on every hr that I worked? That is like $300-$500 all those yrs he owes me per yr.Any over time I put in he paid me $4 cash for any overtime I had. Saying that is what I would get about if taxes where taken out… Then we had to tip bartender 10% & hostess 10%.I would walk out on a fri nite with $40. plus there was 3 other waitress’s on. Bartender made $8hr. & was never there when needing her.Hostess just sat ppl & that was all & made $6hr.

You should go to the NYS Department of Labor’s website and file a complaint. The statute of limitations in NY is 6 years for wage violations so you can go as far back as 2010; the federal statute is only 3 years, so state DOL is the way to go. The OT payments are also in violation so he has minimum wage and OT issues. Depending on the hostess’ duties, she may not have been eligible to share in the tip pool if she were considered management. But you can raise this issue with DOL as well. Good luck and keep us posted

I have a question. Does anyone have any insight into what happens when a tip pool participant is overpaid due to the employer’s mathematical error. Can the employer adjust their tip pool records accordingly to ensure that the amount that was overpaid to the employee is deducted from the next tip pool, or is this strictly prohibited?

hello, I have a situation where Limo Drivers receive tips through cc receipts. We take a tip credit. Therefore, 6.80 X 40 hours and (ot 9.00 X 1.5 =13.50 -2.2 Tip credit = 11.30) My question is do the tips have to be blended to come up with a weighted average on the overtime? Or do the tips just paid straight from the credit card – the fee from the credit card company, but no blending is required?

This law need to pertain to workers in a pool tip position in banquets workers as well, that most hotels do, if u work 40 hrs u then get overtime pay, they don’t do that, change it now, it will great for others, like servers to make some money, an get hours too, greedyness is not ever good for anyone, thank you, Janeen, bam

I excepted a job in a small cafe in my home town, full well knowing that I don’t like the way they run their “pooled tips” in this particular establishment. My first day I was yelled at to not go near the one server who was counting the money at the end of the day…I refused to listen while I stood over her trying to watch. Second shift I asked why they were still a “pooled house” when no one helps one another and the owner yells at staff that needs help from other co-workers. That shift I was allowed to sit in, with same server as yesterday, to count the money. Only to hear how she was distributing the cash to each employee and why it wasn’t going to be even. (this one’s a crack head, that ones 18, she never waitressed before…and so on) 3rd shift I had one of the young servers sitting in so hopefully she got a fair share. Last but not least, 4th shift I decided to keep $20 out of a $25 tip and was asked were the rest of the money was, by same server who counted the money previously. After a long huffing and puffing on her part, I put the remainder $20 in the bucket. We were a little busy that day so the owner called in his girlfriend to over see the floor, who is a server at times but mostly a supervisor…hiring firing, schedule…etc. At the end of that shift I was given a very small share (how do I know, because I just know) and the owners girlfriend had a cut as well. I then got a phone message saying I was fired do to the $20 incident. I e-mailed the owners girlfriend apologizing for the whole thing and how I never thought it was fair the way tips were distributed.I then proceeded to leave texts, e-mails, messages on how I can pick up my shifts pay to only be ignored at first and then to be threatened I would be arrested for theft if I didn’t stop harassing her for my pay…Which I never signed a w-4 or gave any info on my ss# to have a pay check because they pay under the table.

You should go immediately to the NYS Dept of Labor and file a complaint. They cannot withhold your shift pay for any reason – even an alleged theft. Also the tip pooling sounds improper and if a supervisor does not regularly serve, she may not be able to share in the tip pool. Good luck

Can they get me arrested for theft? I never kept the $20 but admitted in an email that I was going to. I don’t want to start a war if I’m going to have charges against me.

I have a quick if not slightly off point question –

my understanding was that it was illegal for an employer (manager or owner) to ask what an employee’s cash tips were …..

And that it was illegal for them to decide what that employee should claim and make that claim on their behalf – and that they had no legal right to change what a person claims …..

Am I wrong ?

It is not illegal for them to ask what their cash tips were. In fact, they have an obligation to find out how much they received to make sure that they reached beyond the minimum wage. They must then record that and keep track of tips received by each employee for 6 years. As far as telling them what to claim, that’s between the employee and the IRS and NYS Tax office. But they do need to report and keep track of the income.

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