Breaking Down the Trickier Aspects of Massachusetts Laws

July 26, 2021

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Some Tips on Tips

Breaking Down the Trickier Aspects of Massachusetts Laws

By Ludwell Chase and Amy B. Royal, Esq.

State and federal laws pertaining to minimum wage, tips, overtime, and employing minors are complicated. As a result, these are areas where mistakes are often made.


Employers, however, cannot afford these errors because the consequences of not complying with these laws can be very costly. In fact, in Massachusetts, there are mandatory treble (triple) damages for violations of wage-and-hour laws relating to minimum wage, tips, and overtime. This means that, if an employer is found in violation of state law, at a minimum, for every dollar an employer does not pay in accordance with wage-and-hour laws, that employer will have to pay three times that amount.


Under Massachusetts and federal law, employers are allowed to pay employees who receive tips an hourly wage that is lower than the minimum wage. This works by allowing employers to take a ‘tip credit’ for a certain amount in tips that the employee earns. The employee must not make less than minimum wage when their tips and hourly wage are combined. Under the federal law, the Federal Labor Standards Act, all hourly workers must be paid the federal minimum wage of $7.25. Tipped workers may be directly paid $2.13 per hour if their tips and hourly wage combined are at least equal to the minimum wage. In other words, employers can claim a ‘tip credit’ of $5.12 per hour.


The U.S. Department of Labor (DOL) recently released new proposed regulations for tipped workers that reinstate the 80/20 rule. This rule limits the amount of time tipped workers can spend performing activities that are related to tip-generating duties, while their employers can still claim the tip credit. Tipped workers must spend at least 80% of their time performing directly tip-generating activities, such as serving customers, and no more than 20% of their time performing not directly tip-generating activities, such as setting tables. This rule was previously in effect but was replaced by DOL guidance in 2018.


The 2018 guidance provided that employers could claim the tip credit if non-tipped duties were performed at the same time as tipped duties, or if the non-tipped duties were performed for a reasonable time before or after tipped duties. This new proposal returns to the 80/20 rule. In addition, the new proposal specifies that, if an employee performs non-tipped activities for 30 minutes in a row, the employer cannot pay the employee the lower tipped hourly wage for that time.


For employers with tipped workers that are subject to federal wage-and-hour law, this proposal is a good reminder that they need to pay attention to these potential changes and their effects on how they compensate employees.


Caution on the Menu

Massachusetts has its own complex laws relating to tips, minimum wage, and overtime. As a result, these are areas where it is easy for employers to make mistakes. Therefore, employers need to pay special attention to ensure they are complying with both state and federal laws. As of Jan. 1, 2021, the minimum wage in Massachusetts is $13.50 per hour. Massachusetts is incrementally increasing the minimum wage in order to reach a $15 minimum wage by 2023. For now, employers may pay workers who make at least $20 a month in tips a tipped hourly wage of $5.55 and take a tip credit of up to $7.95 per hour, for a combined minimum wage of $13.50.


The Massachusetts Tip Law mandates that all tips must be given to employees whose work directly generates tips, and that employers and managers may not keep any portion of their employees’ tips. The law applies to three categories of employees: waitstaff employees, service bartenders, and service employees. Waitstaff employees include waiters, waitresses, busboys, and counter staff who serve beverages or food directly to patrons or clear tables, and do not have any managerial responsibilities. Service bartenders prepare beverages to be served by another employee. Service employees include any other staff providing service directly to customers who customarily receive tips but have no managerial responsibilities. For the purposes of this law, managerial responsibilities are duties such as making or influencing employment decisions, scheduling shifts or work hours of employees, and supervising employees.


Massachusetts law allows for ‘tip-pooling’ arrangements. This means all or a portion of tips earned by waitstaff employees are pooled together and then distributed among those employees. Employers must be cautious when administering a tip pool and ensure that only waitstaff, service bartenders, and service employees are being paid from the pool. This means managers and back-of-house employees like cooks and dishwashers cannot share in tips. Even employees with limited managerial roles who also directly serve patrons are not considered waitstaff employees on days when they perform managerial duties.


When employees do not receive enough in tips to make up the difference between the tipped hourly wage and the minimum wage, employers must pay the difference. Employers are required to calculate tipped employees’ wages at the end of each shift, rather than at the end of the pay period. This requires employers to keep track of how much workers receive in tips for each shift. This may also require employers to pay their tipped employees additional amounts in order to compensate for slow shifts.


Under Massachusetts law, certain businesses, including restaurants, are exempt from paying employees overtime; however, they may not be exempt under federal law. If subject to federal law, employees working in restaurants must be paid one and one-half times the minimum wage (not one and one-half times $5.55 per hour) for all hours worked in excess of 40 hours per week.


Under the Massachusetts Tip Law, if a restaurant includes a service charge, which serves as the functional equivalent of an automatic tip or gratuity, all the proceeds from that service charge must be paid only to waitstaff employees, service employees, or bartenders as a tip. Employers may, however, charge a ‘house fee’ or an ‘administrative fee,’ which they may use or distribute at their discretion, but only if it is clearly stated to customers that the fee is not a tip, gratuity, or service charge for tipped employees. Thus, any fees not intended as gratuities and not paid solely to tipped employees should not be labeled as a service charge.


Food for Thought

These complexities are especially important to Massachusetts employers, given that the consequences of failing to comply with wage-and-hour laws can be costly, and the penalty is the same regardless of whether the employer violated the law willfully or by mistake.


Considering the consequences of violations, businesses with tipped employees should regularly consult with their employment counsel to review their practices and policies to ensure compliance with state and federal law.


Ludwell Chase and Amy B. Royal work at the Royal Law Firm LLP, a woman-owned, boutique, corporate law firm; (413) 586-2288; aroyal@theroyallawfirm.com

This article was published in BusinessWest.

When Bias Creeps into Independent Investigations It All Becomes Tainted.

April 25, 2025
Case Overview: An Asian-American postal worker, Dawn Lui, allegedly became the target of a racial and gender-based harassment campaign after being assigned to lead a new location in 2014. Lui started working at the United States Postal Service (USPS) in 1992 and was promoted to postmaster in 2004, without issue or complaints. Both Lui and her supervisor agree that the coworkers at her new location called her racially motivated names, created false complaints and racially based rumors like that she couldn’t read or speak English, and created a rumor that she was engaging in a sexual relationship with her supervisor. Lui states that she was interviewed in an internal investigation about the alleged sexual relationship. She believes the allegations were created because the supervisor in question is married to an Asian woman. The supervisor claims that HR disregarded his complaints about racial bias regarding the employee. Where They Went Wrong: HR and labor relations officials proposed a demotion for Lui based off of the contested allegations. The demotion required Lui’s supervisor’s signature to move forward. The supervisor refused to sign the demotion and again brought up his concerns that the allegations were baseless and racially motivated. Because of his refusal to sign the demotion paperwork, he was temporarily removed from his position and replaced. His replacement signed off on the demotion and an investigation was not launched after the supervisor’s refusal. Lui appealed the demotion internally and a “neutral” official started an “independent” investigation. USPS argued that this investigation cleared them of making racial and sex based discriminatory actions. Given the possible racial bias and demotion that occurred in this case, Lui filed suit against USPS alleging disparate treatment, a hostile work environment, and unlawful retaliation under Title VII. After the United States District Court for the District of Washington granted summary judgment to USPS on all of the Plaintiff’s claims, the case was appealed to the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit affirmed the USDC’s granting of summary judgment on the retaliation claim, but they found the USDC erred in their finding that the Plaintiff failed to establish a prima facie case of discrimination when they issued summary judgment on the disparate treatment and hostile work environment claims. The Ninth Circuit found that Lui had been removed from her position and demoted to a smaller location with a pay cut, and she was replaced by a white man with less experience. The Ninth Circuit also found that there was a genuine dispute of material fact regarding whether the decision to demote Lui was independent or influenced by subordinate bias. The official never interviewed witnesses, ignored the reports about racial bias, and solely went off the existing reports used in the original decision. The concerns that the employee’s supervisor raised that the allegations were fabricated and racially motived had not been investigated or addressed. The court ruled that a jury could reasonably find that the “independent” investigation wasn’t truly independent. The Court relied heavily on the Cat’s Paw theory of liability. The Cat’s Paw Theory is an employment discrimination doctrine name after the fable “the Monkey and the Cat” by Jean de La Fontaine. In the fable the cat is enticed by the monkey to retrieve chestnuts from the embers of a fire so they both can share. In the fable the monkey eats the chestnuts while the cat has nothing but burned paws. It came to refer to someone doing dirty work on another’s behalf. It made its way into employment law in Staub v. Proctor Hospital, 562 U.C. 411 (2011). An employer can be held liable for discrimination if the information used in the employment decision was based off a biased supervisor, or other biased employee. Even if the ultimate decision maker was not biased, the information remains tainted. Employer Takeaways: Independent investigations are only independent when an independent investigator re-reviews the information available and interviews witness(es) directly. Having an investigator blindly sign off on an investigation that others allege to be racially motivated without due diligence to verify a lack of bias allows bias to seep into employment decisions. If a separate investigation had been conducted, with fresh interviews from a non-biased 3 rd party, the decision would have been free of the original allegations, and the employer would have avoided liability in subsequent suit. If your business has any questions on this topic or any other matters, please do not hesitate to contact the attorneys at The Royal Law Firm at 413-586-2288.

Royal Law at Thunderbirds Hockey Playoff Game in the Executive Perch

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Friday April 18th: Amy Royal, Fred Royal, and Derek Brown attended the Springfield Thunderbirds playoff game! They enjoyed watching the Thunderbirds play the Charlotte Checkers from the Executive Perch.