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The Effect of the Tipped Minimum Wage on Employees in the U.S. Restaurant Industry

Home Employee Rights The Effect of the Tipped Minimum Wage on Employees in the U.S. Restaurant Industry

We Handle wage and tip discrepencies in Massachusetts and Connecticut

Many restaurant workers rely on tips. In Massachusetts, employers in the restaurant industry can take a “tip credit” that allows them to pay servers and other tipped employees a direct wage that is lower than the Commonwealth’s standard minimum wage. In recent years, more and more restaurants are adding service fees to patron checks. Massachusetts law has specific regulations in place for tipped wages and restaurant service fees. Certain fees must be paid entirely to staff—otherwise a restaurant could be disqualified from taking a tip credit. Within this article, our Springfield wage and hour attorney highlights key points that restaurant workers in Massachusetts should know about the tipped wage laws. 

Background: Tipped Credits and Minimum Wage Laws in Massachusetts

In Massachusetts, the legal framework governing tipped credits and minimum wage laws is designed to ensure fair compensation for workers in the service industry. Employers are permitted to pay a lower hourly wage to tipped employees, provided their tips bring their earnings up to the state minimum wage. The “tipped credit” system requires proper monitoring to guarantee that tips make up the difference. In Massachusetts, the tipped employee direct minimum wage is $6.75 per hour. Their tips must make up the full difference and bring their total hourly wages to at least $15.00. 

More and More Restaurants are Adding Service Charges

The trend of restaurants adding service charges to bills is gaining momentum in Massachusetts and throughout the United States. It offers a modern twist to the traditional tipping model. In some cases, restaurants charge service fees instead of collecting tips at all. In other cases, restaurants have a hybrid model where they charge certain service fees while also still encouraging tipping.

Restaurants Must Pay Certain Fees Directly and Entirely Paid to Staff in Massachusetts

Under Massachusetts law (M.G.L. c. 149 § 152A), all service charges imposed on customers by restaurants that are replacements for tips, that are designed for staff, or that are even implied to be going to staff must be paid directly and entirely to staff members. More specifically, the law requires payout of all service fees collected by restaurant if any of the following three criteria are met: 

  1. The Service Fee is Charged in Lieu of a Tip: When restaurants opt to charge a service fee instead of relying on traditional tipping, this fee must be completely allocated to the staff in order to still meet state tipped wage standards. In these cases, restaurants will often charge a service fee that is 18 percent, 20 percent, or similar instead of tipping. The approach is often adopted to provide a stable income to employees—ensuring their earnings are not solely dependent on the fluctuating nature of tips. 
  2. A Reasonable Customer Expects the Fee to Go to Staff: Beyond that, any additional charges where there is a reasonable expectation from customers that the fee is for the staff—such as a gratuity added for large parties—must also be fully passed on to the employees. Even a small service charge, such as something like a 3 three percent charge for employee support, must also be paid out to workers if customers would interpret that charge as going directly to staff. 

What happens if a restaurant does not pay a service fee to staff? Massachusetts law will prohibit them from taking any tip credit. In other words, a restaurant in Massachusetts technically does not have to pay out service fees to staff members. However, if they fail to do so, then they are no longer eligible to take the tip credit. They must pay all workers the full state-mandated minimum wage. As of 2024, the Massachusetts minimum wage for non-tipped employees is $15.00 per hour.

Denied the Full and Fair Wages You Deserve? Three Steps to Take

Unfortunately, wage and hour violations remain a serious problem in the restaurant industry. Too many tipped workers are not paid the full and fair wages that they are entitled to under the law. In some cases, this happens because employers fail to pay out service fees. As a restaurant worker, you need to know how to protect your own rights and interests. Here are three steps to take if you were denied your proper wages in Massachusetts: 

  1. Document It: Wage and hour cases are complicated—especially for tipped workers in the restaurant industry. Documentation can help make the difference in any legal claim. Keep detailed records of your hours worked, the tips received (both cash and credit card), and any other earnings. Remember, Massachusetts law requires employers to ensure tipped employees earn at least the state minimum wage when tips and hourly wages are combined. Note the dates, shifts, and specifics of your work. 
  2. Report It: You have the right to report a wage and hour violation without facing any retribution from your employer. Retaliation is unlawful. If your employer is not adhering to wage laws, you can raise your concerns directly with your employer. You can also report the tipped wage violation to the Massachusetts Attorney General’s Fair Labor Division. 
  3. Get a Lawyer: An attorney can help you protect your rights and seek compensation for your damages. At Hayber, McKenna & Dinsmore, LLC, our law firm is proud to provide top-tier legal guidance and support to workers in Massachusetts, including tipped employees in the restaurant industry. You work hard for your money. We firmly believe that all employees should be paid their full and fair wages in a timely manner. When employers violate wage and hour laws. Proactive legal representation in a must.

Contact Our Massachusetts Tipped Minimum Wage Violation Attorney Today

At Hayber, McKenna & Dinsmore, LLC, our Massachusetts wage and hour lawyer has the skills and experience to handle all types of minimum wage cases. If you were not paid tips in violation of the Commonwealth law, we are here to help. Give us a phone call now at (860) 522-8888 or contact us online for a completely confidential initial consultation. From our office in Springfield, we handle tipped minimum wage violation cases throughout Massachusetts.