State Laws for Tipped Employees

If you receive tips as part of your compensation, state laws determine many of your legal rights. Although federal law sets some minimum standards, states are allowed to be more protective. For example:

  • Employers in most states can take a tip credit: They can pay you a lower minimum wage because you receive tips. (Both the amount of the tip credit and the amount of the minimum wage depend on state law.)
  • You may be required to "tip out" or pool your tips with other employees. States have different rules about tip pools. However, employers or managers are never allowed to dip into the pool.
  • Mandatory service charges – often tacked on to bills for large tables of diners, private parties, and catered events – might belong to your employer, not you. Again, state law sets the rules here.
  • Credit card processing fees can usually be passed on to employees. For example, if the credit card company charges 2% of the bill, your employer probably can dock 2% of your tip.

To learn the rules in your state, select it from the list below.

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