Massachusetts Tipped Minimum Wage Laws for 2022, 2023
Massachusetts labor law allows tipped employees to be paid a lower cash wage than the standard Massachusetts minimum wage by their employers, as up to $7.65 in tips earned per hour can be deducted from their wage as a "Tip Credit". This means that, with the maximum tip credit taken, tipped employees must be paid a cash wage of at least $4.35 per hour, for a total minimum compensation of $12.00 per hour (including tips).
In Massachusetts, a "tipped employee" is defined as an employee who in the normal course of their duties receives more than $20 in tips per month.
How Tip Credits Work in Massachusetts
It's important to note that while the tip credit allows employers to pay tipped employees significantly less than the prevailing minimum wage in cash, no tipped employee should ever receive actual wages of less than $15.00 per hour. As a general rule, the cash wage received plus any tips should equal at least $15.00 for each hour the tipped employee works.
Example Tip Credit Calculation:
Let's say Rick is a server in Massachusetts who receives an hourly wage of $15.00, the Massachusetts minimum wage. During an hour long scheduled shift, Rick receives $8.00 in tips.
For that hour, Rick's employer can credit $7.65 of the received tips against Rick's hourly wage of $15.00, so they will only pay $4.35 in cash wages for that hour. However, including both the cash wage and the $8.00 in tips received, Rick's total earnings are $12.00.
In the next hour of their shift, Rick receives no tips. Because no tips were received to be credited against the minimum wage, the employer must pay Rick $15.00 in cash wages for this hour.
Tipped Employee Labor Laws in Massachusetts
In addition to state regulations, tipped employees in Massachusetts are subject to a number of Federal labor laws specified under the Fair Labor Standards Act (FLSA).
Massachusetts Tipped Employees and Overtime Pay
Most tipped employees in Massachusetts will qualify for overtime pay when they work over a certain number of hours in a week. Overtime hours legally pay 1.5 times the employee's normal hourly wage.
In the event of a tipped employee earning overtime hours, their overtime rate is calculated based on the full minimum wage, not the lower cash wage being paid by the employer. The employer is not allowed to take a higher tip credit for overtime hours than nonovertime hours.
Tip Sharing / Tip Pooling in Massachusetts
Under Federal law, "tip pooling" is allowed as long as all of the employees who are members of the tip pool customarily and regularly receive tips (such as waiters, waitresses, bellhops, bussers, counter personnel, bartenders, etc). A valid tip pool may not include employees who do not regularly receive tips, such as cooks, dishwashers, chefs, janitors, etc.
Aside from a valid tip pooling agreement as specified here, tips are the property of the employee who received them and cannot be claimed by the employer under any circumstances.
Tipped Employees and Dual Jobs
Many tipped employees are also expected to carry out work activities for which they will not receive tips, like washing dishes or janitorial work, as a "side job" or "dual job". According to Federal law, if these non-tipped acticities take up more than 20% of the employees' time, the tip credit is only allowed for hours spent by the employee in the tipped occupation.
Service Charges vs Tips
Many restaurants collect a mandatory service charge from all customers, or from parties of certain sizes. Serviuce charges are not tips, and under the FLSA any portion of thet service charge paid to the employee cannot be used by the employer for a tip credit.
Reporting Tips in Massachusetts
The tip-credit system relies on tipped employees accurately reporting all of their tips to their employers, which allows employers to apply tip credits to their wages as well as accurately report their employees' incomes. In practice, employers will often pressure tipped employees to report at least $7.65 in tips per hour, which allows the employer to apply the maximum tip credit to their wages (and therefore pay the lowest legal cash wage).
Tips are subject to both Federal and Massachusetts taxation. Unlike wages, where payroll taxes (social security and medicare) are split between the employer and the employee, employees are responsible for paying 100% of the payroll tax on earned tips.
Tipped Employee Wage Deductions
Under Federal law, employers may not make any deductions from an employee's wages (for things such as walk-outs, breakage, or cash register shortages) that will bring that employee's hourly wage below the minimum wage. Thus, for Massachusetts employees earning $15.00 (the minimum wage) per hour, no such deductions can be made.
To learn more about tipped workers' rights and wage laws under the FLSA, check out the Department of Labor's fact sheet "Tipped Employees Under the Fair Labor Standards Act" here , or call the Department of Labor's free help hotline from 8am to 5pm with questions at 1-866-4USWAGE (1-866-487-9243).