Wage Violations & Tipped Employees

Tips Are Not a Loophole to Pay You Less Than You Deserve

In New York, tens of thousands of workers earn their living primarily through tips. From busy restaurants to late-night bars, hospitality staff keep our economy moving, and they often do it for base wages that fall below minimum wage. But that lower wage is legal only when strict rules are followed. If your employer is bending or breaking those rules, you could be getting shorted on every single paycheck.

This kind of wage abuse is common, but it’s not okay. We hear from tipped workers all the time who weren’t told about tip credits, were forced to share tips with management, or were paid below the minimum wage even when their tips didn’t add up. At Horn Wright, LLP, our employment law attorneys know the pressure service workers are under, and we know how to hold employers accountable.

You might not know where to start. That’s normal. But if you’re getting paid less than you should be, or if your tips are being mismanaged, you may be entitled to recover far more than you think.

How Tipped Wages Work Under New York Law

Tipped employees are allowed to earn less than the full minimum wage,  but only when their tips legally make up the difference. This is known as a "tip credit," and it’s tightly regulated by both New York Labor Law and the federal Fair Labor Standards Act (FLSA). When employers take the credit without following the rules, they’re violating the law.

As of 2025, in New York City, the minimum wage is $16.00 per hour. Employers can pay certain service employees $10.65 per hour if the employee earns at least $5.35 per hour in tips, bringing them up to the minimum wage. This structure also applies, with varying rates, across Long Island, Westchester, and upstate New York.

However, under New York Labor Law §196-d and 12 NYCRR Part 146, the tip credit can only be used if:

• The employee is notified in writing about the tip credit at the time of hire.
• The employee regularly receives enough tips to meet or exceed the minimum wage when combined with the base rate.
• Tips are not shared with owners, managers, or ineligible staff.

If your employer failed to meet any of these criteria, they may owe you the full minimum wage for every hour worked, possibly going back six years under Labor Law §198(3).

When Employers Illegally Deduct or Keep Tips

It happens more often than you’d think, tips are skimmed off the top, pooled improperly, or withheld entirely. These aren't harmless bookkeeping mistakes. Under NY Labor Law §196-d, employers are strictly prohibited from keeping any portion of tips intended for employees. And under the FLSA, the misuse of tips can eliminate the employer’s ability to claim a tip credit at all.

Illegal practices might include forcing you to share tips with supervisors, deducting for breakage or walkouts, or retaining credit card fees beyond what’s permitted. Even if the amount seems small at first, it adds up quickly over weeks and months, and across multiple workers.

What’s worse is that many of these violations are hidden in plain sight. Employers may not call it “taking your tips,” they may phrase it as “company policy” or a “fair split.” That doesn’t make it legal. If your boss is doing anything other than passing 100% of customer tips to eligible staff, you may have a claim.

Tip Credits and When They Cannot Be Used

Not every role in a restaurant or hospitality setting qualifies for a tip credit. Employers must follow strict rules to ensure they’re only applying the credit to workers who primarily earn their income through customer tips. If your work doesn’t meet that threshold, or if you’re asked to perform too much non-tipped work , your employer may be violating the law.

The “80/20 Rule” under U.S. Department of Labor guidance says that no more than 20% of a tipped employee’s shift can be spent on non-tip-generating duties. If you're a server who spends a chunk of every day prepping silverware, stocking shelves, or sweeping floors, those hours may not count toward a tip credit.

Additionally, New York law bars employers from applying a tip credit when:

• The employee is not customarily tipped.
• The worker spends more than two hours, or more than 20% of a shift, on non-tipped duties.
• The employer failed to provide written notice of the tip credit, as required under 12 NYCRR §146-2.2.

In these cases, employers must pay the full minimum wage for all hours worked. Many don’t, either due to ignorance or, more often, because they’re hoping workers won’t push back.

Common Violations in Restaurants and Bars

Restaurants and bars are among the most common offenders when it comes to wage violations, especially those tied to tips. The fast pace, long hours, and high turnover create the perfect storm for employers looking to cut corners. Often, workers don't even realize a violation has occurred until they speak with someone who knows the law.

Some of the most frequent issues include:

• Improper tip pooling where ineligible staff — like managers or kitchen workers — receive a share of the tips. This practice violates NYLL §196-d and disqualifies the employer from using a tip credit.
• Paying less than minimum wage during slow periods without making up the difference if tips fall short. If your tips don't bring you up to $16/hour (in NYC), your employer must cover the gap.
• Forcing workers to clock out early and continue side work off the clock. This not only violates minimum wage requirements, but also overtime rules under FLSA §207(a).

Restaurants and bars may justify these practices as “normal industry standards,” but that doesn’t make them legal. If you've experienced any of these practices, you’re not alone, and you have the right to recover what you’ve lost.

How New York’s Tipped Wage System Compares to New Hampshire’s

New York’s tipped wage laws are significantly more protective than those in New Hampshire. While both states allow for a reduced base wage for tipped employees, New York has implemented clearer standards and broader penalties for violations.

New Hampshire follows the federal tipped wage minimum, which is just $2.13 per hour under the FLSA. By contrast, New York's tipped wage is much higher — and employers must meet strict documentation and notice requirements under 12 NYCRR Part 146.

Additionally, New York offers:

• A six-year statute of limitations for wage claims under Labor Law §198(3).
• Specific rules governing tip pooling and employer retention of gratuities.
• Access to liquidated damages and attorney’s fees under NYLL §198(1-a), making it easier for workers to recover what they’re owed.

The difference means that workers in New York have far more tools at their disposal if their tips are being mismanaged or stolen outright.

What You Can Do If Your Tips Were Mishandled

If something feels off with your pay, trust that instinct. Tipped workers often worry about retaliation or job loss, and that fear keeps too many people silent. But the law gives you options, and acting sooner can help you protect both your income and your rights.

You can begin by:

• Keeping track of your hours and tips, even in a simple notebook or notes app. Courts often accept worker records if employer records are incomplete.
• Saving schedules, pay stubs, and text messages about shift changes or wage rates. These help establish patterns that support your claim.
• Connecting with coworkers to see if others are experiencing the same treatment. Collective or class actions are especially powerful in tipped wage cases.

If you’re ready, you can file a complaint with the New York State Department of Labor or bring a civil claim under FLSA §216(b). In many cases, speaking with an employment attorney first will help you understand your best route, and what you might be able to recover.

How to Prove a Tip Violation Without a Paper Trail

It’s frustrating when employers don’t give proper pay stubs, or when tips are paid in cash with no record. But a missing paper trail doesn’t mean you’re stuck. In fact, it may actually strengthen your case, because the law places the burden on employers to maintain proper records under 29 CFR §516 and NYLL §195(4).

Courts understand that tip workers often operate in cash-heavy environments. If your employer didn’t track or report your tips correctly, you can use your own records, and the law allows it.

Some helpful proof includes:

• Daily tip logs, where you record tips earned, hours worked, and any deductions. These don’t need to be perfect, just consistent.
• Photos of posted schedules or shift assignments, especially if they show long hours without proper pay.
• Testimony from coworkers who witnessed illegal tip pooling, unpaid side work, or verbal policies that violated wage laws.

In many cases, these types of evidence are enough to shift the burden to your employer, and force them to explain where your pay went.

What You May Be Entitled to Recover

If your employer violated New York’s tipped wage laws or the FLSA, your potential recovery could be significant. You’re not just entitled to your missing tips or underpaid wages. You may also be eligible for penalties, interest, and legal fees, all designed to hold your employer fully accountable.

Under the law, you may recover:

• The full amount of wages and tips owed
• Liquidated damages equal to 100% of that amount
• Interest on unpaid wages going back as far as six years
• Attorneys’ fees and costs, if you file a successful claim

If your employer retaliated against you for speaking up, you may also have a separate claim under NYLL §215, which provides additional compensation and protections.

How Horn Wright, LLP, Can Help You Protect Your Tips and Pay

Your tips are your wages. If your employer is skimming off the top, misusing tip credits, or making you work unpaid hours, Horn Wright, LLP, is ready to stand with you. Our employment law attorneys know how to expose wage theft and recover what you’ve earned, with interest and penalties.

We’ve helped service workers across New York file strong legal claims, and we’ll take the pressure off your shoulders from the moment you call. If you're ready to work with a legal team recognized for protecting tipped employees, let’s talk.