Massachusetts tip law: tip pools, service charges and house fees

Massachusetts has one of the strictest tip laws in the country. Under the state's Tips Act, tips and service charges belong to the staff who serve the customer, and a manager cannot keep them. Getting it wrong is expensive, because staff can sue and the law gives them extra damages. If you run a restaurant, cafe or bar in Massachusetts, the wording of your charges, who is in your tip pool and how fast you pay out all matter.

Who can share in tips under Massachusetts law?

The law covers three groups: wait staff, service employees and service bartenders. These employees can share a tip pool, and they can receive the proceeds of a service charge. Owners, managers and supervisors cannot, on any day on which they have managerial responsibility, even if they help serve customers that day. The Attorney General's advisory on tips and the state's pay guidance set out these rules.

Kitchen staff, such as line cooks and dishwashers, are generally not in the covered groups, so they cannot be included in a tip pool or paid from a service charge under the Tips Act. If you want to reward the kitchen, do it through wages, a bonus from your own money, or a separately described fee that you keep (see below), and take advice on how to structure it.

What is the difference between a tip and a service charge?

A tip is a voluntary amount that a customer decides to leave. A service charge is a fee that a business adds to the bill, often as a fixed percentage or for large parties. Under the Tips Act, if you add a service charge or a charge that a customer would reasonably believe is a tip, you must distribute it to the covered staff in proportion to the work they did. The statute does not define proportion, and the courts have accepted an estimate of proportionality.

A service charge cannot be used to pay the wages you owe. It is paid on top of wages.

Can you charge a house or administrative fee?

Yes, if it is truly a different fee. State guidance says an employer may impose a separate fee and may label it as an administrative, house, kitchen appreciation or other fee, and may keep it or distribute it as it likes. The fee has to be clear to the customer that it is not a tip or a gratuity. The wording on the menu and the check decides how a court will read it.

Here is a safe approach:

1. Do not use words like tip, gratuity or service in the name of a fee you intend to keep.
2. Show the fee on the menu, the website and the check, in type as large as the prices.
3. Say what the fee is for, such as kitchen costs or health insurance contributions, so there is no suggestion it goes to servers.
4. Keep the fee separate from any voluntary tip line.

If you adopt a no-tipping policy, communicate it clearly to customers, and ask a Massachusetts employment lawyer how the Tips Act applies to your pricing.

How fast do you have to pay out tips?

Tips and service charges collected from customers must be paid to the covered employees promptly. Pay them out as quickly as your payroll allows, and no later than the deadline for paying wages. Late payment, or paying tips from credit card sales only after the card processor settles, is a common source of claims. Check the current rule with the Attorney General's guidance and an employment lawyer.

If you pass on credit card processing costs from tips to staff, take advice first. Practices vary, and deductions from tips are tightly limited.

What are the Massachusetts wage rules for tipped staff?

Massachusetts allows an employer to pay tipped workers a lower service rate, with tips making up the difference. Compliance sites for 2026 list the state minimum wage at 15.00 dollars an hour and the service rate for tipped employees at 6.75 dollars an hour. If tips do not bring a worker up to the full minimum wage, the employer must make up the shortfall. Confirm the figures on the Attorney General's wage page before you set payroll.

What records should you keep?

Keep a daily record of tips received, how they were divided, and who was working which role. If you run a pool, write down the formula, such as points by role and hours. Ask the Attorney General's office how long records must be kept. If an employee asks how a pool works, you should be able to show them. A written tip policy, given to each new hire, prevents most disputes.

What should you do about large parties and events?

Large parties and private events are where owners most often add a charge. Decide beforehand whether the charge is a service charge (which must go to covered staff) or an event fee (which you can keep, if described clearly). Put the wording in the contract or booking confirmation. If you take a deposit for an event, say what it covers.

How do you reduce the risk?

Review your policies once a year. Read your menu, website, check template and booking terms for any wording that could be read as a tip. Make sure managers do not share in the pool. Train the team on how the pool works. If you use point of sale software, check that service charges are reported separately from tips, so you can show where the money went. When in doubt, ask the Attorney General's Fair Labor Division or an employment lawyer.

More guides for your business:

• Massachusetts happy hour ban: what bars and restaurants can offer instead
• Hiring and keeping restaurant staff in Massachusetts: a practical guide
• Massachusetts food allergen awareness rules for restaurants

More in the US guides for food businesses.