Tipped employees must be paid a minimum of $2.63 per hour provided that with tips, the employee receives at least $8.00 per hour including tips. If the total hourly rate for the employee, including tips does not equal $8.00, then the employer must make up the difference.  Read more about the minimum wage on our site.

Tip Pooling

Under M.G.L. c.149, s.152A, the Massachusetts Tips Statute, an employer may require tipped employees to pool their tips.  Such tip pooling can only take place among workers that the law calls "service employees": workers who customarily receive tips such as bartenders or wait staff. The pooling must be in proportion to the service provided by those employees.

"Employers" such as owners and managers are forbidden from taking any amount from the tip pool.  The law defines employer broadly, to include anyone who has "employees in [his] service" and anyone whose primary job duty is managing service employees, even if the manager has no ownership share in the business.

Service Charges

Service charges, like tips, are amounts added on to the principal amount due on a bill or invoice.  The primary difference between a service charge and a tip is that the service charge is determined by the business producing the bill or invoice, as opposed to being determined by the customer paying the bill.  An example of a service charge is when a restaurant automatically adds an 18% gratuity to every bill.  While a customer may certainly include an additional tip, the service charge is not discretionary.  If a business chooses to add a service charge to a bill, it must distribute the proceeds in "proportion to the services provided" by the employees of the business.  The service charge must be distributed among employees even if they are paid a higher, non-tipped employee wage.

A service charge is not an administrative or facilities fee, which a business may impose and keep for itself.  Massachusetts law effectively presumes that a percentage fee on a bill is a service charge to be distributed to employees unless the charge is clearly and explicitly identifed as an administrative fee to be kept by the business.  Northeastern University learned this lesson the hard way in Cooney v. Compass Group Foodservice, 69 Mass. App. Ct. 632 (2007).  

As discussed in the Court's opinion, for almost a decade Northeastern had invoiced customers of one of its conference centers with what it called a "service charge" - a percentage fee that it used as a facilities fee for the maintenance and upkeep of the conference center - based on the amount due for food and beverage services provided during the conference.  The waitstaff and service employees who worked at the conference center never received any portion of the service charge.

In the invoices Northeastern sent to its conference center customers, no indication or warning was given that the service charge was actually a facilities fee used for the maintenance and upkeep of the conference center and that Northeastern would keep the entire fee.  At trial, Northeastern argued that the fee was obviously meant to be an administrative or facilities fee and that merely calling it a "service charge" did not mean that the Massachusetts Tips Statute applied.  This argument did not hold water with the Court. The court explained:

Whether a payment is made directly to the service employee or made indirectly to others on the employee's behalf -- as would happen when a customer adds a tip to a credit card total or pays an invoice indicating a "service charge" -- the statute requires that the proceeds be remitted to the service employees. The terms "tip," "gratuity," and "service charge," as used in § 152A, are synonymous.

If you are an employee who earns tips and have questions about your compensation scheme or believe your employer has illegally withheld tips you've earned, do not hesitate to give us a call or fill out the form on the right.