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New York tip pooling law: Labor Law 196-d and the Hospitality Wage Order

Last reviewed 2026-11-07 · US law

New York allows a tip credit but regulates tips more closely than federal law: it names the occupations that may share, keeps its own side-work limit, requires written records for six years, and makes the employer prove a service charge is not a tip. The 2026 rates are below.

The statute: Labor Law §196-d

No employer or its agent may demand, accept or retain any part of a gratuity, or any charge purported to be a gratuity. The section expressly allows tip sharing and tip pooling among employees — including employer-required pooling — and allows an employer to collect pooled tips and distribute them to employees under a pool. An “agent” is a supervisor or manager; the test is whether the person has meaningful authority over other employees (hiring, firing, discipline, scheduling, setting pay), not the job title.

Who may share: the Hospitality Wage Order list

The Hospitality Industry Wage Order (12 NYCRR Part 146, §§146-2.14–2.17) says only “food service workers” and “service employees” may receive tips through sharing or pooling. The Order gives examples of eligible occupations: wait staff, counter personnel who serve food or beverages, bussers, bartenders, service bartenders, barbacks, food runners, captains who provide direct food service, and hosts who greet and seat guests. Cooks, dishwashers and other back-of-house staff are not on the list, so New York does not permit kitchen tip-outs even where the employer takes no tip credit — stricter than federal law. Employees with meaningful authority (managers, many “head waiters”) are excluded whatever their title.

Employers may set the shares for each occupation (e.g., bussers receive a fixed percentage), and may require participation. Employees may also pool voluntarily. Either way the employer must keep the records described below.

2026 tip credit rates

New York lets hospitality employers pay tipped workers a lower cash wage and count tips for the rest, within limits. Rates effective January 1, 2026 (New York State Department of Labor):

“Food service workers” are those primarily serving food or beverages to guests and who regularly receive tips (servers, bartenders, bussers, runners). “Service employees” are other tipped roles such as coat check and delivery. The tip credit for service employees is only available when weekly average tips reach a threshold the Order sets (for restaurants and all-year hotels in 2026, $3.65/hour downstate and $3.40 upstate). Outside the hospitality industry, New York abolished the tip credit at the end of 2020.

New York’s own side-work rule (two hours / 20%)

On any day a tipped employee spends more than two hours, or more than 20% of the shift, on non-tipped work, the employer may not take a tip credit for that day and must pay the full minimum wage (§146-2.9). This is New York law and did not go away when the federal 80/20 rule was vacated in 2024. Track side work if you take the credit.

Credit card fees

New York allows the employer to deduct the proportional card processing fee from a card tip (a 3% fee on a $10 tip leaves $9.70 for the employee) but may not deduct anything more, and must pay card tips no later than the regular payday (§146-2.20). This matches the federal rule and differs from California.

Service charges: the employer must prove it was not a tip

Any charge in addition to charges for food, drink and lodging is presumed to be a gratuity that must go to staff, unless the employer clearly tells the customer — on menus, bills and contracts, in plain language — that the charge is for administration and is not a gratuity for employees (§§146-2.18–2.19). A banquet “service charge” that is not disclosed this way belongs to the service staff.

Records: six years

Employers that run tip sharing or pooling must keep, for six years, daily records of the tips collected by each employee, the occupations eligible to share, the shares each receives and the amounts actually distributed (§146-2.17). Payroll records must show the tip credit claimed for each week. Give employees written pay notices that state the tip credit (Labor Law §195).

This guide is general information for operators, not legal, tax or payroll advice. Rates and rules change; the official sources above are the authority. SplitTips applies the rule you set and does not decide what is lawful in your jurisdiction.