108 | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP The tipped employee may receive tips directly or through a valid tip pool.627 If the tip pool is invalid (i.e., it includes individuals who do not qualify to receive tips under the statute), the tip credit is lost, and the employer must pay the full minimum wage.628 Calculation of overtime for a tipped employee, particularly where service charges are also involved, constitutes a complicated analysis that should be undertaken with the advice of counsel.629 Massachusetts also stipulates that employers that pay less than minimum wage to tipped employees must inform those employees in writing of the applicable law and must make clear to them that the employer will be paying the lower rate.630 An employer must always pay at least $6.75 in hourly wages to a tipped employee, even if the employee’s tips alone exceed the Commonwealth’s minimum wage of $15.00 per hour.631 F. Liability for Violations Both companies and individuals may be liable for violations of the Tip Statute.632 The statute defines an “employer” as “any person or entity having employees in its service, including an owner or officer . . . or any person whose primary responsibility is the management or supervision of wait staff employees, service employees, or service bartenders.”633 Thus, the statute allows for individual liability for those having “management responsibility but no ownership stake in an enterprise.”634 The SJC has held that a business may be liable for violating the Tip Statute even when the service 627 454 C.M.R. § 27.03(2). 628 The regulations state that “[i]f the employee is engaged in the serving of food or beverages, such a tip-pooling arrangement must conform with the requirements of M.G.L. c. 149, § 152A.” 454 C.M.R. § 27.03(2). This language suggests that this provision does not apply to tipped employees engaged in services other than the serving of food and beverage, but there is no guidance from the court or DLS interpreting this language. 629 454 C.M.R. § 27.03(3) (“The overtime rate for a tipped employee receiving the service rate shall be computed at one and one half times the basic minimum wage, except where exempted by M.G.L. ch. 151,§ 1A.”). 630 Id. 631 DLS Opinion Letter MW-2008-001 (Jan. 8, 2008). Although the regulations addressing the tip credit and service rate only refer to tips and not service charges, the DLS (the entity with authority to interpret the minimum wage laws) has taken the position that tips and service charges are interchangeable for purposes of the minimum wage statute and tip credit. See id.; 454 C.M.R. § 27.03(2) (“The minimum wage rate for a tipped employee may be comprised of both (a) the service rate paid by the employer; and (b) tips actually received and retained by the employee.”) (emphasis added). This is in contrast to federal law. Under the FLSA, while a service charge paid to an employee counts towards the minimum wage, it is not a tip and cannot be counted toward the $30.00 tip requirement. See 29 C.F.R. § 531.55(b) (“[S]ervice charges and other similar sums which become part of the employer’s gross receipts are not tips for the purposes of the Act. Where such sums are distributed by the employer to its employees, however, they may be used in their entirety to satisfy the monetary requirements of the Act.”). Rather, service charges (and mandatory gratuities) are wages under federal law and thus subject to the same tax treatment as other non-tip wages. See IRS Rev. Rul. 2012-18, 2012-26 I.R.B. 1032. 632 Massachusetts Attorney General Advisory 2004/3, at 3. 633 M.G.L. ch. 149, § 152A(a) (2004) (emphasis added). 634 Massachusetts Attorney General Advisory 2004/3, at 3.
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