Delaware Tip Laws: What Employers Should Know in 2025

 

Delaware doesn’t leave much gray area when it comes to tip laws, and that’s both good and bad. On one hand, your team knows exactly what’s expected regarding tipped wages and tip pooling. On the other hand, even small missteps, like mishandling a tip pool or deducting card fees, can trigger fines or wage claims. Knowing the ins and outs of state tip laws is important to make sure you pay your staff fairly and your business stays out of trouble.

What counts as a tip in Delaware?

Under Delaware law, a tip is a voluntary payment made by a customer to a tipped employee. Tips are not wages that an employer sets, and they’re not required by the restaurant. The customer decides how much to leave and who it goes to.

If a customer hands over extra cash after paying their bill, leaves something on the table, or adds a tip to their credit card or Venmo payment, that counts as a tip. These payments belong to the employee who earned them, not the employer. These tips are often what allow tipped employees to earn enough to meet or exceed the minimum wage.

Who qualifies as a tipped employee?

A tipped employee is someone who regularly earns more than $30 per month in tips. This isn’t just a one-time thing. They must customarily and consistently receive tips as part of their job.

Typical tipped employees in restaurants include servers, bartenders, bussers, and barbacks. These roles involve direct service to customers and often bring in steady employee tips.

These are the team members who can legally be paid below the minimum wage as long as tips make up the difference. They’re also the ones who can be part of a tip pool under both state and federal labor laws.

However, working in a restaurant and interacting with customers doesn’t automatically qualify someone as a tipped employee. Roles like host, food runner, or expediter may not meet the threshold if they only get occasional tips.

In those cases, the employer must pay them the full minimum wage directly and can’t apply a tip credit. Including ineligible employees in tip pooling or paying them less than the required minimum can violate labor law and create compliance issues.

Service charges vs. tips

It’s important not to confuse tips with service charges. A tip is something a customer voluntarily gives to your employee to show their appreciation for the latter’s service.

On the other hand, a service charge is a fee added by the business. For example, if you add an 18% fee on top of bills for large parties or catering, that’s considered a mandatory charge, not a tip.

Gratuities that are required by the restaurant don’t count as tips, and the employer can keep them, but only if you clearly tell the customer up front. That means putting a notice on the menu, placard, or bill. If you don’t, you may legally owe that money to the tipped employee who served the guest.

Also, service charges can’t be added to tip pooling arrangements. These charges are not counted as gratuities under federal law or Delaware regulation, so including them in a tip pool or distributing them like employee tips could lead to problems during a wage audit.

Minimum wage and tip credit rules in Delaware

As of this year, Delaware minimum wage is set at $15 per hour. For tipped employees, the minimum cash wage remains $2.23 per hour. The difference of $12.77 is called the tip credit.

Employers can count their team’s tips as part of their wages. But you can only take the tip credit if the employee actually earns enough in tips to hit the $15 per hour requirement.

Let’s say a server works 20 hours a week. To meet the full minimum wage, their total earnings need to be at least:

20 hours × $15 = $300

If they earned $200 in tips and were paid $2.23 per hour in cash (which totals $44.60), then their total pay is:

$44.60 (cash) + $200 (tips) = $244.60

That means the employer owes an extra:

$300 – $244.60 = $55.40

As the employer, you’re legally required to pay that difference. Additionally, be especially careful when a tipped employee works dual jobs.

For example, if your bartender also does non-tipped work like inventory or cleaning, the tip credit only applies to the time spent doing tipped work. Sidework like rolling silverware or wiping menus is usually allowed under the tip credit, but only if it’s related to the service they provide.

If an employee does unrelated work, like driving deliveries or running errands, they must be paid the full minimum wage for those hours. Misclassifying these duties is a common mistake that can lead to violations of labor law and put your wage records under scrutiny.

Tip pooling and tip sharing in Delaware

Tip pooling is a common way for restaurant teams to share employee tips, but there are clear restaurant tip pooling laws you must follow. Let’s start with voluntary tip pools. These are systems where tipped employees decide to share their gratuities with other team members who help during a shift, like bussers or barbacks.

In Delaware, employees are allowed to set up their own tip pool, but it has to be 100% voluntary. As the employer, you cannot pressure or force anyone to join. The rules of the pool should be clear, fair, and led by employees, not management.

Then there’s mandatory tip pooling, which is more restricted. The state allows this only when more than one employee directly serves the same guest, like when a server and a food runner work together on a table.

Even then, the maximum contribution allowed is 15% of the primary server’s tips. That rule applies to protect tipped employees from losing too much of their income. Only FOH employees who provide direct service can be included in a mandatory pool.

There’s one firm line under both federal law and Delaware labor law: supervisors, managers, and owners can’t receive any portion of a tip pool. It doesn’t matter if they help run food or fill drinks, they’re not allowed to benefit from tip-outs, either directly or indirectly.

Credit card tips and processing fees

If your customers leave tips on a credit card, those belong fully to the tipped employee, not the employer. Under Delaware law, it’s explicitly illegal to deduct any amount from those tips to cover credit card processing fees. That means you cannot subtract the 2% to 3% swipe fee that your payment processor charges.

Even if you’re trying to cover business costs, you’re still not allowed to reduce an employee’s tip amount. This rule applies no matter how small the fee is, and it’s stricter than what’s allowed under federal law. Delaware wants to make sure tipped employees get 100% of their gratuities, especially when they’re already earning the minimum cash wage.

If an employer deducts card fees anyway, they’re violating Title 19, §902(d) of the Delaware Code. The state considers this wage theft, which is a serious offense.

Penalty could include paying back the full amount of withheld tips, fines, and even civil lawsuits. The Department of Labor in Delaware actively checks for this issue, especially during audits or when an employee files a complaint.

Overtime pay rules for tipped employees

When a tipped employee works over 40 hours in a week, you must pay them overtime (OT). It must be based on the full minimum wage, not the minimum cash wage. Under Delaware and federal law, the OT rate is 1.5x the standard minimum wage.

$15 × 1.5 = $22.50 per hour

If a tipped employee works 45 hours in one week:

• 40 hours × $15 = $600
• 5 OT hours × $22.50 = $112.50

If the employee earned $90 in tips during those OT hours, the employer must still pay the difference:

$112.50 – $90 = $22.50 owed by employer

Keep in mind that overtime rules apply to all tipped workers, including those in tip pooling systems. Even if they earn a lot in employee tips, you’re still required to pay OT based on the full minimum wage.

Required notices and record-keeping

To legally apply a tip credit and stay compliant with local labor laws, employers must follow clear rules about what they tell tipped employees and how they track their pay. At the time of hire, you must tell each tipped employee four key things:

1. Their cash wage ($2.23 per hour)
2. That you’re taking a tip credit to meet the full minimum wage
3. All tips belong to the employee
4. Those tips may be shared only through a valid tip pool

This notice can be oral or written, but putting it in writing is best practice. It protects both the employer and the employee, and creates a clear record for any future questions or DOL reviews.

In addition, you must display the labor law poster provided by the Delaware Department of Labor. This poster must be visible and accessible to all employees, including tipped staff working split shifts or night hours.

When it comes to record-keeping, Delaware law and federal law both require you to keep detailed payroll records for at least three years. That includes:

• Hours worked
• Pay rates (cash and total)
• Tips reported by employees
• Tip pooling or tip sharing breakdowns

If the DOL audits your restaurant and you don’t have these records, you’ll likely automatically lose the case. The burden of proof falls on the employer, not the employee.

Tip laws done right

Delaware’s tips laws may be stricter than federal rules, but they’re there to protect tipped workers and make sure they get their fair pay. As long as you follow proper tip pooling practices and keep clear records, you can run your business with peace of mind.

Keeping up with tip pooling laws doesn’t have to be a headache. With 7shifts’ tip management software, you can automate distributions, set custom rules, and make sure your team gets paid accurately every time.

It’s built specifically for restaurants, so it pulls in your time clock, sales, and employee data to handle the math for you. That means fewer errors and full transparency for your staff and your records.