Massachusetts Tip Laws

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 includes 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 different 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 Massachusetts.

When Were the Tip Laws Last Updated in Massachusetts?

Tip laws in Illinois were updated in January 2021.

Does Massachusetts Have Tip Laws That Differ from Federal Tip Laws?

Yes, Massachusetts has laws in place that differ from the regulations under the FLSA. Since the state minimum wage is higher than the federal minimum wage, the service rate is higher for employees making at least $20 on average per month in tips. The rate in $6.75 per hour, and employers must calculate tipped employee wages at the end of every shift. An employer is permitted to take a tip credit of up to $8.25 per hour.

General laws, section 152 outlines the terms of tipped employees in the state.

Who Holds the Ownership of Tips in Massachusetts?

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 Massachusetts?

A tip given to an employee must be paid out by the end of the business day.

What are the Tip Pooling Rules in Massachusetts?

Employers in Massachusetts are allowed to establish mandatory tip pools. Eligible employees share a portion of their tips, which are distributed among the group. Employers must keep all eligible staff members informed about the arrangements of the tip pool.

Who Can and Can’t Participate in Tip Pools in Massachusetts?

Waitstaff, service employees, and service bartenders are allowed to participate in tip pools. Owners and managers are specifically restricted.

Is there a Difference Between Tips and Service Charges in Massachusetts?

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 Massachusetts?

The law generally restricts employers from taking deductions from employee tips aside from contributions to a tip pool, but it doesn’t specify whether credit card processing fees can be deducted.

Do Tips Count Toward the Minimum Wage in Massachusetts?

Yes, the tip credit can count toward minimum wage.

Do Tips Factor Into Regular Rate Calculations for Overtime Pay in Massachusetts?

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 Massachusetts That Have Their Own Tip and Service Charge Rules That Differ from Statewide Laws?

No, there are currently no cities or municipalities with differing tip or service charge rules.

What Are the Record-Keeping Requirements for Employers Regarding Tips in Massachusetts?

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 Massachusetts?

An employee may take legal action against an employer who violates state tip laws.

What are the Penalties for Employers for Not Complying with Massachusetts Tip Laws?

Violating Massachusetts tip laws can subject an employer to a fine between $7,500 and $25,000 per violation (with the amount depending on whether it is a first-time offense and if it was intentional). Employers may also be held liable for three times the amount of service charges and tips owed to employees (triple damages), as well as any applicable attorney’s fees and interest.

Managing the regulations associated with tips in Illinois can be a challenge. But with WorkforceHub, your business can ensure accuracy. The numerical clock prompt feature allows the employee to input their received tips at the end of the shift, and that information would be available for reporting and payroll processing.

MA General Laws, Part I, Title IIX, Chapter 149, Section 152A (service charges and tips, tip pools, penalties)