Tip Pooling: Know the Law in Massachusetts

By Robert P. Rudolph, Esq.

Massachusetts General Laws Chapter 149, Section 152A explicitly outlines Massachusetts law regarding service charges, tips, tip pools and penalties for violation. The protections provided to employees by the statute cannot be waived by private agreement, so it is important for business owners in the hospitality industry to understand the law, as its penalties for violation can be catastrophic.

Massachusetts tip laws require tipped employees to be paid a minimum of $2.63 per hour (the “service rate”), provided that with tips, the employee is paid at least the prevailing minimum wage per hour, currently $8.00 in Massachusetts. If the total hourly rate for the employee including tips does not equal the prevailing minimum wage per hour, the employer must make up the difference.

Tip pooling laws in Massachusetts forbid owners and employees with managerial responsibility from sharing in tips or the proceeds of any employer mandated service charge paid by customers. Pursuant to 455 CMR 2.02, an employer may pay the service rate of $2.63 per hour to the employee only if: (1) the employer has informed such employee of the provisions of the third paragraph of M.G.L. c. 151, § 7; (2) the employee actually received tips in an amount which, when added to the service rate, equals or exceeds the basic minimum wage; and (3) all tips received by the employee were either retained by him or her or were distributed to him or her through a tip-pooling arrangement. Unless all three of the foregoing requirements are met, the employer must pay a tipped employee the full basic minimum wage rate.

There are three classes of employees who may generally share tips or receive the proceeds of a service charge: wait staff, service employees, and service bartenders, each of which has its own qualifications. To qualify as “wait staff”, a worker must work in a restaurant, banquet facility or other place where prepared food or beverages are served, must provide service to customers by serving beverages or prepared food directly, or by clearing customers’ tables, and must not have any managerial responsibility. Kitchen and administrative staff who do not serve patrons directly are not “wait staff”, nor are many employees with limited managerial responsibility such as shift supervisors, assistant managers, and maître d’s. “Service employees” are workers who work in occupations in which they customarily receive tips in the course of their work, who do not work in food and beverage service, who provide service directly to customers, and who have no managerial responsibility (i.e., bellhops, baggage handlers, hairdressers, etc…). “Service bartenders” are employees who prepare alcoholic or nonalcoholic beverages for patrons to be served by another employee, such as a wait staff employee.

Employers cannot keep tips or service charges or demand, request or accept any portion of a service charge paid by a patron or tip given by a patron to wait staff, service employees or service bartenders. Tips and service charges can only be distributed to wait staff, service employees and service bartenders. A violation of the tipping law can represent a violation of the state minimum wage law and have significant penalties.

An aggrieved employee can prosecute both on his own behalf, or bring a class action on behalf of himself and others similarly situated, for injunctive relief and any damages incurred. An employee who prevails on such a claim is entitled to a mandatory award of treble damages for lost wages and benefits, and to the costs of litigation and reasonable attorneys’ fees. The president and treasurer of a corporation and any officers or agents responsible for management of such corporation are deemed to be the employers of the employees of the corporation and can be held responsible for damages under the Massachusetts Wage Act. Further an employer, or any officer, agent or employee thereof who violates the Wage Act is subject to a fine or imprisonment imposed by the Attorney General’s Office.

When defending wage claims it is important to have competent employment law counsel who understands the Massachusetts Wage Act and the intricacies of settling Wage Act claims.