Summary
Minnesota tip laws have a couple of deviations from federal standards. Unlike most states, Minnesota bans the use of tip credits, ensuring all workers earn the full minimum wage. The state also enforces strict tip pooling rules, prohibiting employers from requiring workers to share tips with managers or non-tipped staff.
Key provisions:
- Minnesota prohibits employers from claiming tip credits from any employee. All employees, regardless of tipped status, must receive the full minimum wage of $11.13
- Tip pooling arrangements are only valid if employee-initiated.
- Tip pools can include indirect-service employees, but not managers or supervisors
Minnesota has the strongest protections for tipped workers in the country. It bans tip credits, guarantees full minimum wage for all employees, and enforces strict limitations on tip pooling. To run a successful business, it’s crucial to understand state rules and why they matter. Knowing the nitty-gritty of state tip laws helps you avoid legal trouble, create a fair workplace, and earn the trust of both employees and customers.
What is a “tip” in Minnesota?
Minnesota law defines a tip as a voluntary payment a customer gives an employee as a reward for services rendered. This payment is not required by the employer and is separate from the advertised product or service cost.
Under Minnesota law, tips are the property of the employee who receives them. Employers may not deduct, withhold, or control tips unless tipped staff have voluntarily agreed to a tip pooling arrangement.
What is the difference between a tip, a gratuity, and a service charge?
Minnesota law treats the terms “tip” and “gratuity” as one and the same. However, “service charge” has a separate legal definition. Where tips or gratuities are voluntary payments the customer leaves directly to employees, service charges are mandatory fees the establishment adds to the customer’s bill.
Tips belong to the employees, while service charges belong to the business. Employers cannot control tips but may distribute service charges as they choose.
Minimum wage and tip credits in Minnesota
The minimum wage in Minnesota is $11.13 per hour. However, this does not apply in the cities of Minneapolis and St. Paul, which override the state minimum with their own local wage ordinances.
In Minneapolis, the minimum rate is $15.97 per hour. Meanwhile, in St. Paul, the minimum rate increases based on business size.
| Macro businesses (10,001+ employees) | $15.97 per hour |
| Large businesses (101 to 10,000 employees) | $15.97per hour |
| Small businesses (6 to 100 employees) | $15 per hour |
| Micro businesses (5 or fewer employees) | $13.25 per hour |
Unlike most states, Minnesota prohibits employers from claiming tip credits from the wages of tipped employees. This guarantees all employees, whether they earn tips or not, a fair and steady income.
Tip pooling in Minnesota
Tip pooling is a kind of tip distribution arrangement that lets tipped employees combine their tips into a shared fund called a tip pool. After each pay period, they divide the tips based on position, number of shifts worked, and other agreed-upon percentages.
Under Minnesota law, tip pooling is only valid when voluntary and employee-initiated. Unlike most states, Minnesota prohibits employers from forcing participation or requiring tip pooling as a condition of employment.
Minnesota tip pooling rules
Minnesota law sets clear rules to help employers create fair tip pool arrangements. These define what kind of tip pooling arrangements employers can legally establish, and who can participate.
Can employers require tip pooling?
Minnesota law protects employees by ensuring tip pooling is always voluntary and employee-initiated. As mentioned, employers cannot make tip pooling a job requirement or direct employees to tip pools. This rule protects employees from giving up the tips they earn during their shifts?
Who can participate in tip pooling?
Because Minnesota requires tip pooling to be employee-initiated, staff can choose to include any non-supervisory coworker. This may include not only direct-service workers like servers, bartenders, and baristas, but also indirect support staff who help them, such as bussers, food runners, and cooks.
However, federal law prohibits managers and supervisors from participating in tip pools. Their authority over wages, schedules, and discipline creates a conflict of interest that risks creating unfair tip distribution arrangements.
Which types of tip pooling arrangements are legal?
Based on the above regulations, below are examples of valid tip pooling arrangements.
- Voluntary tip pooling among direct-service and indirect-service employees: Direct-service employees may agree to share tips solely among themselves or with indirect-service employees who support their tasks.
- Same-shift tip jars: Minnesota law allows employees working the same shift to collect money in a tip jar (or any equivalent fund or container) and split shares at the end of the shift.
- Divided gratuities in multi-server situations: If multiple direct-service employees work together to serve one customer and the customer only leaves one tip for the whole group, all employees who helped provide the service may take a share.
Legal consequences of violating tip laws in Minnesota
Minnesota takes labor rights very seriously. To prevent repeat violations, the state enforces serious consequences for breaking tip laws, including repayment of lost wages, fines, and, in severe cases, even jail time.
Wage claims
If an employer illegally withholds or deducts tips, their employees may file wage claims with the Minnesota Department of Labor and Industry’s (DLI) Labor Standards Division. If the claim is successful, employers must repay all improperly withheld or misallocated tips, plus a penalty worth one day’s pay for each day they are late.
For example, let’s say a server earns $100 per day in credit card tips. However, the employer withholds the tips and does not transfer them to the server’s bank account. After 22 days without payment, the server files a wage claim with the Minnesota Department of Labor and Industry (DLI).
The DLI reviews the claim and notifies the employer of the violation. But even after receiving the notice, the employer still doesn’t pay. 10 more days pass without any action.
Under Minnesota law, the employer must now pay the employee:
- $2,200 worth of back wages
- A penalty fee of $1,000, since the payment was 10 days late
Civil penalties
Employers who commit serious tip law violations may face civil penalties or fines from the DLI. These penalties were designed to hold employers accountable and protect employees from intentional or repeated harm.
Typically, the DLI issues civil penalties when an employer:
- Refuses or delays payment after being notified of a violation
- Repeatedly violates tip laws
- Affects multiple employees through their actions
- Misreports tip income
- Retaliates against employees who file wage claims
Like wage claims, penalties typically force employers to pay back unpaid wages. Depending on the offense, the DLI may also ask the employer to pay late fees, liquidated damages, and attorney’s fees.
Lawsuits
In more severe cases, employees might file lawsuits instead of (or in addition to) wage claims with the DLI. This often happens when a wage claim doesn’t resolve the issue, when several employees are affected, or when the employee wants to seek damages that the DLI cannot award.
Additionally, the DLI can only handle claims of $15,000 or less. If the amount owed is higher, the employee must file a civil lawsuit to recover the full amount.
Employees can file civil lawsuits on their own or as a group. When multiple workers are affected, they may file a collective or class action lawsuit. Like wage claims, successful lawsuits can require employers to pay back wages, liquidated damages, attorney’s fees, and interest.
Criminal charges
Minnesota law classifies tip law violations as wage theft if the offense includes a clear intent to defraud. This means that the employer knowingly or willfully withholds tips from employees, rather than it being an honest mistake. If found guilty of wage theft, the employer may face misdemeanor or felony charges. Depending on the amount withheld and intent, the government may impose fines, imprisonment, or both.
Public enforcement actions
The DLI regularly investigates complaints and publicly announces enforcement actions against violators. These announcements name the guilty business, the offense committed, and the penalties owed. As a result, employers may face reputational damage, which affects customer trust and makes it harder to attract new employees.
Streamline tip management with 7shifts
Although Minnesota’s unique laws might make tip management confusing, using the right tools can make your job simpler. 7shifts’ tip management features help simplify everything from tip tracking and reporting to calculating and distributing pooled tips. By automating time-consuming admin tasks, these tools shift your focus back to your business, your employees, and your growth potential.
Rebecca Hebert, Sales Development Representative
Rebecca Hebert
Sales Development Representative
Rebecca Hebert is a former restaurant industry professional with nearly 20 years of hands-on experience leading teams in fast-paced hospitality environments. Rebecca brings that firsthand knowledge to the tech side of the industry, helping restaurants streamline their operations with purpose-built workforce management solutions. As an active contributor to expansion efforts, she’s passionate about empowering restaurateurs with tools that genuinely support their day-to-day operations.
