Tipped employees (such as servers, bartenders, and bussers) are protected under the Fair Labor Standards Act (FLSA) and Colorado wage laws. If you regularly earn over $30 per month in tips, special rules apply to your minimum wage, overtime pay, and how tips must be treated.
Whether you’re confused about tip pooling, working dual jobs, or wondering if your employer is paying you correctly, it’s important to understand your rights. The employment lawyers at Baird Quinn can help you evaluate whether your pay complies with the law.
What Is a Tipped Employee Under the FLSA?
A tipped employee is defined as someone who “customarily and regularly receives more than $30 a month in tips.” This includes restaurant workers, bartenders, hotel bellhops, salon staff, and others who directly interact with customers.
Tips are the legal property of the employee. Employers cannot take, keep, or share in tips — even if the worker earns more than the federal or state minimum wage.
How Does the Tip Credit Work?
Under the FLSA, employers can count a portion of your tips toward their minimum wage obligation. This is called the tip credit. Federal law allows:
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A maximum tip credit of $5.12/hour
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A minimum direct wage of $2.13/hour
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Total pay must equal at least $7.25/hour (federal minimum wage)
Before using the tip credit, an employer must inform you of:
- Your hourly cash wage (at least $2.13)
- The tip credit amount being claimed
- That the tip credit cannot exceed the actual tips you receive
- That all tips belong to you, except in a valid tip pool
- That you must be informed of these rights
If an employer fails to give proper notice, they cannot claim the tip credit and must pay the full minimum wage directly.
In Colorado, the minimum wage is higher, and the permitted tip credit is smaller. For 2025, Colorado’s minimum wage is $14.42, with a maximum tip credit of $3.02, meaning employers must pay tipped workers at least $11.40/hour in direct wages. Always verify current state rates.
What Are the Rules on Tip Pooling?
A tip pool is a system where tipped employees share tips. This is legal only if:
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It’s limited to employees who customarily and regularly receive tips
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Non-tipped staff (like dishwashers, cooks, and janitors) are not included
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Employers do not take a cut or keep any portion of the pool
Employers must also notify workers of any required contributions and ensure each employee ends up with at least the full minimum wage when combining cash wages and tips.
Tipped Employees Working Dual Jobs
If you work two roles for the same employer — one tipped and one not — the tip credit applies only to the tipped job. For example:
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A worker who is both a waiter and a janitor can only have tips credited during the waiter hours.
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Employers may count some related non-tipped duties (e.g., setting tables, prepping coffee) as part of the tipped job — but only if those duties are limited.
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If you spend more than 20% of your week on non-tip-producing tasks, the tip credit may no longer apply during that time.
What About Service Charges?
A mandatory service charge (e.g., a 20% gratuity added to a bill) is not considered a tip under federal law. These charges belong to the employer. However:
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The employer may choose to distribute part of the service charge to employees
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These distributions count toward regular wages, not tips
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Any voluntary customer tips are still your property and subject to tip credit rules
Can Salaried Employees Receive Tips?
Yes, salaried employees can receive tips. But if you’re non-exempt (meaning you’re eligible for overtime), your employer must still track your hours and pay overtime properly. Tips do not count toward overtime pay and cannot offset an employer’s obligation to pay time-and-a-half for hours worked over 40 per week.
Common Wage Violations for Tipped Workers
Some employers — intentionally or not — violate tipped employee laws. Common violations include:
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Taking tips or deducting for breakage, walkouts, or customer mistakes
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Failing to inform employees of tip credit rules
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Including managers or back-of-house staff in a tip pool
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Not paying full minimum wage when tips fall short
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Misclassifying workers as “salaried” to avoid overtime
Need Help Understanding Your Tipped Pay?
If you’re unsure whether your employer is complying with tipped minimum wage laws, or if you suspect violations of tip pooling or overtime rules, Baird Quinn’s employment lawyers can help. We advise tipped workers and employers across Colorado on proper wage and hour practices under the FLSA and Colorado law.
Let us help you determine whether your pay is lawful — and take action if it’s not. Contact us today.
Frequently Asked Questions: Tipped Employee Rights
What is considered a tipped employee?
Anyone who regularly earns more than $30/month in tips is considered a tipped employee under the FLSA.
Can a salaried employee earn tips?
Yes — but if they’re non-exempt, they must still receive overtime pay for extra hours.
What is the tipped minimum wage in Colorado?
As of 2025, it is $11.40/hour, with a maximum tip credit of $3.02. Employers must ensure total earnings reach at least $14.42/hour.
Can an employer keep part of my tips?
No. Tips belong to the employee and may not be retained by the employer under any circumstances.
Are tip pools legal?
Yes — but only among workers who regularly receive tips (e.g., waitstaff, bartenders). Back-of-house staff cannot participate.