Tips (Gratuities) and Tipped Employees Under Colorado Wage Law

Division of Labor Standards and Statistics
707 17th Street, Denver, CO 80202 | 303-318-8441
www.ColoradoLaborLaw.gov | www.LeyesLaboralesDeColorado.gov

Interpretive Notice & Formal Opinion ("INFO") #3C:
Tips (Gratuities) and Tipped Employees Under Colorado Wage Law

Overview

This INFO covers how Colorado law protects "tips" that employees receive, as well as how and when employers can pay "tipped employees" less than full minimum wage. Key definitions:

• "Tipped employee": An employee regularly receiving over $1.64 per hour in tips (COMPS Order, 7 CCR 1103-1, Rule 1.10; see also Colo. Const. art. XVIII, § 15: "No more than $3.02 per hour in tip income may be used to offset the minimum wage of employees who regularly receive tips").
• "Tip" (or gratuity): A customer payment in any form (cash, credit, electronic, etc.) for goods or services that is voluntary, i.e., above the required payment, and discretionary as to what, if anything, the customer pays. Tips are earned and vested as soon as paid by customers, and must be given to employees timely without forfeiture, like any wages or compensation (C.R.S. §§ 8-4-101(14)(a)(II), 8-4-103(1), 8-4-103(6), 8-4-121). Tips may still be pooled among tipped employees, as detailed below.

Employers Paying "Direct Wages" under Minimum Wage Based on a "Tip Credit"

Wages that employers pay tipped employees are called their "direct" or "cash" wages. Direct wages can be less than full minimum wage by up to $3.02, an amount that's called the employer's "tip credit." As of 2026, a local minimum wage law can provide a higher tip credit than $3.02, under conditions detailed in INFO #19; as of the date of this INFO, only the jurisdiction of Edgewater has a higher tip credit ($4.67). For updated Colorado minimum wages, see the Publication And Yearly Calculation of Adjusted Labor Compensation ("PAY CALC") Order, 7 CCR 1103-14, Rule 1.2, and Colo. Const. art. XVIII, § 15; as to local minimum wages, see INFO #19.

Minimum wage (and, in parentheses, minimum direct wage with the tip credit applied):

Key limits on when employers can use tip credits to pay direct wages below the full minimum wage (some limits are from tips law, others from the rule that minimum wage exceptions are interpreted narrowly — C.R.S. §§ 8-6-102, 8-4-103(6); COMPS Order, 7 CCR 1103-1, Rules 6.2.3, 8.7(A)):

1. Employers can't pay less than $3.02 below full minimum wage, no matter how high tips are (employers in jurisdictions that adopt a tip credit above $3.02 may take a larger tip credit if allowed — see INFO #19). In 2026, that requires at least $12.14 ($16.27 in Denver) in direct wages, even if tips are (for example) $20 per hour.

2. Employers can't claim tip credits for workers who do not earn enough in tips to qualify as tipped workers. As of January 1, 2024, tipped employees must receive at least $1.64 per hour in tips.

Example 1: A coffee shop receives $400 in tips over a weeklong pay period. It pools those tips and distributes evenly based on hours worked among all staff (except managers), since all interact regularly with customers. Its non-managers are 4 part-timers who work 25 hours, and 4 full-timers who work 40 hours per week — for a total of 260 hours worked in the week. That means the coffee shop is distributing $400 in tips across 260 hours, so employees are receiving $1.54 per hour in tips. Since tips do not exceed $1.64 per hour in the week, the coffee shop cannot claim a tip credit in that pay period.

3. Employers must pay enough in direct wages for total pay, with tips, to reach full minimum wage in each workweek. If an employer pays direct wages below full minimum wage, but tips end up too low to raise total pay to full minimum wage, then the employer must make up the difference in direct wages (COMPS Order, 7 CCR 1103-1, Rule 6.2.3).

Example 2: In 2026, an employer outside of jurisdictions with local minimum wages paid direct hourly wages of $12.14. Tips raised total pay above full minimum wage ($15.16). One week, tips drop to $2.00 per hour, making total pay $14.14, which is $1.02 below full minimum wage. The employer must make up the difference, by adding $1.02 per hour in direct wages, in the pay period for the week with lower tips.

Example 3: If the job in Example 2 is in Denver, direct hourly wages in 2026 must be at least $16.27 ($3.02 below Denver's $19.29 minimum), or higher if tips are under $3.02. If tips drop to $2.00 per hour, the employer must raise direct wages to $17.29 ($2.00 below full minimum) to make up the difference.

4. Employers can't claim tip credits from mandatory charges. The tip credit allows direct wages below full minimum wage only if "tips" make up the difference. Mandatory charges, like a 20% "service charge," aren't "tips," because customers can't choose whether and how much to pay (Osteria Marco, Inc. v. CDLE, Case No. 2023CV30489 (Denv. Dist. Ct. Feb. 27, 2024), upholding hearing officer's decision that a service fee paid by individual diners was voluntary and therefore was a tip). They're just part of a service or good's costs; a $10 sandwich plus a 20% service charge is a $12 sandwich. However:
   - Employers can use service charges to fund employee wages, but not for a "tip" credit allowing direct wages below full minimum wage (accord 29 C.F.R. §§ 531.52, 531.55(a)).
   - If an employer communicates that automatic charges go to (for example) servers (e.g., calling it a "gratuity," a synonym for "tip" in wage law), then they're still service charges, not tips, but they're "wages or compensation" the server must be paid — because the employer agreed the amount goes to the server, satisfying the "wages or compensation" definition (C.R.S. § 8-4-101(14)(a)(II)), and impacting customers' tips.

5. Employers can't claim tip credits if they take away tips. That means employers:
   - can't make tipped employees share tips with non-tipped employees — often called "tip pooling," or "tipping out" other staff — like managers or "back of house" staff who do not perform significant customer service in contact with patrons (cook, dishwasher, etc.) (COMPS Order, 7 CCR 1103-1, Rule 1.10; Shahriar v. Smith & Wollensky, 659 F.3d 234, 240 (2d Cir. 2011), citing Myers v. Copper Cellar, 192 F.3d 546, 548, 550-51 (6th Cir. 1999): "[Because] . . . salad preparer[s] had no personal contact with diners, . . . worked entirely outside . . . [diner] view . . . , and solely performed . . . food preparation or kitchen support . . . , they could not be validly categorized as 'tipped employees' . . . . [For] shifts in which salad mixers were included within the tip pool, the pooling . . . was illegal; thus each employee . . . compelled to contribute . . . [was] entitled to payment of the full . . . minimum wage for all work . . . [in] those shifts." Those not directly tipped still can qualify if their direct customer interactions impact tips — for example, bussers may help servers by clearing tables, and hosts may "sufficiently interact with customers" to generate "undesignated tips" if they "greet customers, supply them with menus, seat them at tables, and . . . 'enhance the wait'" (Myers, 192 F.3d at 550; U.S. Dep't of Lab., Wage & Hour Div., Field Operations Handbook, § 30d04, Nov. 17, 2016)); and
   - can't keep any tip funds as employer revenue, which is unlawful even if it claims no tip credit — see below ("Limits on Sharing Tips").

6. Employers in jurisdictions with local minimum wages may have further restrictions in applying the tip credit: e.g. Denver, Edgewater, and Boulder (city and county) limit tip credits only to food and beverage workers (see INFO #19).

Tip Credits for Employees Doing Both Tipped and Non-Tipped Work

Tip credits can apply to all hours of those doing a mix of tipped and non-tipped duties only under two conditions. This framework refers to the U.S. Department of Labor's ("DOL") decades-long interpretation of 29 C.F.R. § 531.56(e) (the "Dual Jobs Regulation") through its interpretive guidance on the "80/20 rule" (Tip Regulations Under the Fair Labor Standards Act, 86 Fed. Reg. 32818, 32827-29, proposed June 23, 2021, 86 Fed. Reg. 60114, 60129-30, Oct. 29, 2021, formerly codified at 29 C.F.R. pt. 531, collectively "FLSA Tip Regulations"). In support of applying the 80/20 rule to the Colorado definition of "tipped employee," the Division previously cited 29 C.F.R. § 531.56(f) — the 2021 rule in which the DOL had formally codified its 80/20 guidance ("2021 Final Rule"). However, since this INFO #3C was last updated, one court vacated the 2021 Final Rule because it disagreed with the DOL's interpretation of the FLSA definition of "tipped employee" (Rest. L. Ctr. v. Dep't of Lab., 120 F.4th 163, 174-75 (5th Cir. 2024)). The Fifth Circuit concluded that the FLSA definition of "tipped employee" was unambiguous and did not authorize the DOL to codify the 80/20 rule based on the agency's own interpretation of terms it found ambiguous (id. at 173-74) — contravening the opinions of several other federal courts that had previously agreed with the DOL that these terms were ambiguous (Marsh v. J. Alexander's LLC, 905 F.3d 610, 621-22 (9th Cir. 2018) (en banc); Fast v. Applebee's Int'l, Inc., 638 F.3d 872, 880-81 (8th Cir. 2011); Romero v. Top-Tier Colo. LLC, 274 F. Supp. 3d 1200, 1206 (D. Colo. 2017)). However, the Fifth Circuit's decision does not affect the Division's interpretive guidance on tips for several reasons.

First, the Division's application of the 80/20 framework has never depended on the validity of the 2021 Final Rule. As the Division initially published in March 2020 (before the 2021 Final Rule became effective in December 2021), "[r]egardless of federal law, the 80/20 rule applies under Colorado law, because the minimum wage reduction for tipped work is an exception to the full minimum wage, and all exceptions to wage rights are construed narrowly under Colorado Revised Statute § 8-6-102" and COMPS Order Rule 8.7(A) (INFO #3, p. 2, published Mar. 30, 2020; see also INFO #15B, at 2, n.4, stating that, under Colorado law, exceptions and exemptions are interpreted "narrowly to preserve the primary operation of the general rule" that "bestow[s] . . . [a] right" — a rule of interpretation commonly applied to laws that grant or broaden rights, quoting Broadak v. Visconti, 165 P.3d 896, 898-99 (Colo. App. 2007)). Thus, the Division will continue to construe the tip credit exception narrowly by applying the 80/20 rule to preserve an employee's right to earn a minimum wage for performing non-tipped work.

Next, the Colorado definition of "tipped employee" does not mention "occupation" — evidencing the Division's intent to require a duties-focused approach when deciding whether to apply a tip credit to a tipped employee's non-tipped work (COMPS Order, 7 CCR 1103-1, Rule 1.10; see Statement of Basis, Purpose, Authority, & Findings for COMPS #39, 2023, at 4, explaining that the amended definition of "tipped employee" intended to replace the inquiry of "whether an 'occupation' is 'customarily' tipped enough for tip-pooling/sharing" with "an expressly individualized look to the duties of the particular employee"). Because the Colorado definition of "tipped employee" emphasizes the importance of an employee's duties, the Division gleans no value from the Fifth Circuit's interpretation that made the employee's occupation determinative of whether an employer can claim a tip credit for non-tipped work (Rest. L. Ctr., 120 F.4th at 173). Thus, the Division will continue to apply a duties-focused approach, which aligns with the core of the DOL's longstanding interpretation that many courts have relied on and applied (Marsh, 905 F.3d at 629-30; Fast, 638 F.3d at 880; Romero, 274 F. Supp. 3d at 1206).

Finally, the Fifth Circuit's vacating of the 2021 Final Rule only restores the status quo that existed prior to the final rule's adoption (Green v. Perry's Rests. Ltd., 758 F. Supp. 3d 1312, 1320 (D. Colo. Dec. 5, 2024)). Though the 2021 Final Rule no longer maintains the force of law, it still represents the DOL's most recent clarification of its decades-long interpretation of the Dual Jobs Regulation. And "just as the Fifth Circuit was free to find persuasiveness — or not — in earlier [judicial] opinions" showing deference to the DOL's interpretation, the Division is "free to do the same as to the" Fifth Circuit's "independent statutory interpretation of the FLSA" (id.). As such, it disagrees with the Fifth Circuit and continues to find persuasive the DOL's interpretation as most recently clarified in the 2021 Final Rule and its proposed version. For these reasons, the Division finds that the DOL's recent interpretation remains helpful for interpreting the Colorado definition of "tipped employee" and explaining what kind of and how much non-tipped work a "tipped employee" can perform while still being fairly described as "regularly receiving" tips during the time they performed the non-tipped work.

The two conditions:

1. The non-tipped work must "directly support" the tipped work (FLSA Tip Regulations, 86 Fed. Reg. 32818 at 32827-29, 86 Fed. Reg. 60114 at 60129-30; the "directly support" phrase reflects the DOL's most recent clarification of the "related duties" phrase in the Dual Jobs Regulation, chosen because the DOL believed "related duties" terminology "may have inadvertently caused confusion"). For example, for restaurant servers, non-tipped work "directly supporting" tipped work:
   - includes refilling condiments, making coffee, table setup or cleaning, or idle time awaiting tipped work;
   - does not include bathroom or kitchen cleaning, maintenance, or window-washing; and
   - does not include food preparation, except for workers who, after preparing food, directly serve it to customers, such as at a sushi bar, a bar, or an ice cream counter (COMPS Order, 7 CCR 1103-1, Rule 1.10(A); DOL-WHD Field Operations Handbook, § 30d08(c)(2), Nov. 17, 2016, revised Mar. 3, 2023; see also FLSA Tip Regulations, 86 Fed. Reg. 60114 at 60028-29).

2. The non-tipped work must not take a "substantial" amount of time, which means it must:
   - not be more than 20% of the tipped employee's weekly hours — the traditional "80/20 rule"; and
   - not last more than a continuous half-hour — because when an employee does non-tipped work that long, they have stopped performing work for which they regularly earn tips (FLSA Tip Regulations, 86 Fed. Reg. 32818 at 32829-31, 86 Fed. Reg. 60114 at 60136-38; the Division previously applied the DOL's 80/20 guidance, and still agrees with the DOL's elaboration on the definition of "substantial amount of time," which had included the performance of non-tipped work for a "continuous" time of over a half-hour, even if not 20% of the tipped employee's weekly hours, as that period of time becomes one during which the employee is not regularly receiving tips. This interpretation remains consistent with existing law: Fast, 638 F.3d at 880, no tip credit for "nontipped duties performed during distinct periods of time, such as before opening or after closing"; Myers, 192 F.3d at 549, servers who spent continuous periods of time, "entire shifts," performing non-tipped work were "employed in dual jobs" and no tip credit could be taken, reasoning that "an employee who discharges distinct duties on diverse work shifts may qualify as a tipped employee during one shift, such as . . . serv[ing] tables, but might not qualify . . . on another shift . . . perform[ing] maintenance tasks").

Example 4: Several restaurant servers spend 10% or 30% of their time on various non-tipped duties. Whether a tip credit applies depends on both conditions:
- A server who refills condiments on tables (directly supports tipped work) for just 10% of time, not over 30 continuous minutes: tip credit applies to all hours, because that non-tipped time isn't "substantial."
- The same server, if the non-tipped time is 10% of time but occurs in several 1-hour periods, or is 30% of time: tip credit applies only to the 70-90% of time spent serving customers; no tip credit for the non-tipped work, because non-tipped work over 20% of time, or over 30 continuous minutes, is "substantial."
- A server who cleans restrooms (doesn't directly support tipped work): no tip credit for that time regardless of how little time it takes; tip credit still applies to the remaining time spent serving customers.

Limits on Sharing Tips

General requirements for valid tip sharing. An employer may require tipped employees to share tips — whether "pooling" tips, "tipping out," etc. — if:

1. employees are told in advance that their tips will be shared, and how they will be shared (what calculations, and which employees), including any required employee contribution to a tip pool (C.R.S. § 8-4-103(6): employer can require tip pool only "on a preestablished basis among the employees"; McFeeley v. Jackson Street Entertainment, 825 F.3d 235, 246 (4th Cir. 2016));
2. customers are notified in writing that tips they leave will be pooled, in any way (a notice on a menu, a table tent, a receipt, etc.) that gives customers notice before they decide on any tip (C.R.S. § 8-4-103(6): "gratuities are the sole property of the employee unless the employer notifies each patron in writing, including by a notice on a menu, table tent, or receipt, that gratuities are shared by employees"); and
3. employees receive at least full minimum wage in total pay, which can include tips from a lawful tip pool, up to the maximum tip credit (if any) allowed for the employee (see "Tip Credits," above) (COMPS Order, 7 CCR 1103-1, Rule 6.2.3).

Specific limits on sharing tips:

1. Employers may require tip sharing with untipped employees (cooks or dishwashers, etc.) — but if they do, then the employer:
   - can't claim a tip credit — neither for the tipped nor the untipped employees, and therefore
   - must pay all employees at least full minimum wage in direct wages — i.e., tips provide no credit toward the full minimum (COMPS Order, 7 CCR 1103-1, Rule 1.10; 29 C.F.R. § 531.54(d)).

2. Employers may not use tips in any of the following ways — and if they do, they can't claim a tip credit, and must pay full minimum wage and return any tips that were (COMPS Order, 7 CCR 1103-1, Rule 1.10; C.R.S. § 8-4-103(6); 29 C.F.R. § 531.54(c)(3),(d)):
   - used to pay business expenses, including direct wages for any (tipped or non-tipped) employees (employers must pay as direct wages the amounts an employer has agreed an employee will be paid for their work; a set pay rate may not be paid out of a tip pool, in whole or in part; however, an employer may properly include tips in a guaranteed minimum amount of overall compensation — e.g., at least $30/hour with minimum wage and tips, with the employer paying a higher wage if tips are insufficient — so long as (1) the employee will receive additional compensation if tips exceed this threshold, and (2) the guaranteed rate does not determine payments into or distributions from a tip pool, as this is not a valid "preestablished basis");
   - used to pay credit card processing fees or similar costs; or
   - kept by an employer, manager, or supervisor (C.R.S. § 8-4-103(6): "unlawful for an employer . . . to assert a claim to, or right of ownership in, or control over gratuities"; C.R.S. § 8-4-105; COMPS Order, 7 CCR 1103-1, Rule 1.10; 29 U.S.C. § 203(m)(2)(B): "An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion . . . , regardless of whether or not the employer takes a tip credit"; 29 C.F.R. § 531.54(b)(1)). This means that the following persons cannot share in tips or participate in a tip pool: (1) anyone who qualifies as an "employer" under the Colorado Wage Act (C.R.S. § 8-4-101(6); see INFO #11A for information about individuals as "employers"); (2) any employee whose duties, performed for at least one workweek, match those of an exempt "[e]xecutive[] or supervisor[]" as described in COMPS Order Rule 2.2.2 (see INFO #1A for more on these duties); and (3) any other "manager" or "supervisor" prohibited under federal law as described in 29 C.F.R. § 531.52(b)(2) (see U.S. Dep't of Lab., Wage & Hour Div., Opinion Letter FLSA 2025-1, Jan. 14, 2025, explaining whether an employee is barred from a tip pool as a "manager" or "supervisor" depends on their duties in the "job as a whole," which requires looking at their duties "on at least a workweek basis"). However, any employee — including a manager, supervisor, or individual "employer" under C.R.S. § 8-4-101(6) — may keep tips they receive directly from customers based on the service that the manager or supervisor "directly and solely" provided, as long as these tips are clearly traceable and have not been comingled with other tips in a tip pool (29 C.F.R. § 531.52(b)(2)).

Overtime Pay When Employers Claim Tip Credits

• For work beyond 40 hours per week, or 12 per day or shift, employees must be paid overtime — one and one-half times their regular rate — under the COMPS Order, unless overtime-exempt (example: salaried managers, paid at least the minimum amount for exemption, who mostly supervise others, may be exempt; some employer types have other overtime exemptions — see COMPS Order, 7 CCR 1103-1, Rules 2.2-2.5).
• If a tip credit is allowed, the overtime rate is time-and-a-half of the full minimum wage (not time-and-a-half of the reduced minimum wage), and the tip credit lowers that rate up to $3.02 ("[e]mployees shall be paid time and one-half of the regular rate of pay," COMPS Order, 7 CCR 1103-1, Rule 4.1.1, and "[t]he regular rate includes all compensation paid to an employee, including . . . minimum wage tip credits," id. Rule 1.8.1). For example, in 2026, the minimum overtime wage employers can pay, based on the minimum wage with a tip credit:
• Time-and-a-half of full minimum wage: $22.74 (Colorado, no local minimum wage); $28.94 (Denver); $27.26 (Edgewater); $25.23 (Boulder County); $25.23 (City of Boulder).
• With tip credit subtracted: $19.72 (Colorado); $25.92 (Denver); $22.59 (Edgewater); $22.21 (Boulder County); $22.21 (City of Boulder).

Required Recordkeeping

Employers must keep records of hours, pay, and tips — which includes recording any differences between tips left for an employee and tips paid to that employee, such as from tip-sharing (pooling, tipping out, etc.). COMPS Order Rule 7.1 requires employers to keep an "accurate record for each employee" that includes a "(C) daily record of all hours worked; (D) record of credits claimed and of tips; and (E) regular rates of pay, gross wages earned, withholdings made, and net amounts paid each pay period." For tipped employees:

• A record of all "tips," without any limitation, requires recording all tips left for employees, whether or not any part was shared in tip pooling, tipping out, etc. — e.g., all tips customers leave for their servers.
• Employers are advised to keep such records on a daily or workweek basis.
• If a tip is deemed to be equally for multiple persons (e.g., a collaborative restaurant service model of multiple staff serving one table), the employer must record only the tip amount and which persons it was left for.
• A record of "gross wages earned" and "credits claimed" requires records of tips paid to a tipped employee — which may differ from tips left for the employee in the case of tip-sharing.
• These records must be kept on a daily or weekly basis — weekly tip logs, nightly "tip out" sheets, etc.
• A multi-week total of tips left and paid (a biweekly or monthly pay period, etc.) is not sufficient, as it lacks the daily or weekly tip amounts required to calculate a tip credit.

An employer must keep records for tips, even if they would not otherwise be documented, like tips paid in cash. Failing to keep such records may prevent employers from showing that a tip pool excludes untipped employees (e.g., cooks) who can't be included without nullifying tip credits, or that tips weren't illegally retained by an employer, supervisor, etc.

Remedies

Invalid tip pools and improper uses of tip credits each require remedies for workers affected.

Invalid tip pools. A tip pool is invalid if it: (a) does not notify customers that tips are shared; (b) is not on a pre-established basis; or (c) is shared with owners, managers, or supervisors (C.R.S. § 8-4-103(6); 29 U.S.C. § 203(m)(2)(B)).

• To remedy an invalid tip pool, the employer must ensure that each employee is paid the amount of tips they originally earned in each workweek. This means the employer must return all tips paid into the tip pool to the employees who originally earned the tips. The employer must calculate, for each workweek, the amount each employee (a) paid into the tip pool during a workweek (contributions) and (b) received from the tip pool (distributions). The employer must then return to employees the amount of contributions less distributions for each workweek. If an employee's distributions exceed their contributions in any given week, this amount does not reduce the total tips owed.

Example 5: A valet service shares tips among tipped employees, but the employer collects and distributes tips irregularly, and has never established to employees how their tips are pooled, or to whom the tips are distributed. For example, in some weeks, 100% of tips are pooled; in others, only the first $50 of each worker's tips are pooled. This tip pool is invalid because it lacks a "pre-established basis." As a remedy, the valet must ensure that each employee is paid the amount of tips they originally earned in each workweek over the duration of the invalid tip pool. If an employee's contributions and distributions in Week 1 were $200 and $100 respectively, and in Week 2 were $100 and $200 respectively, the employee would be owed $100 for Week 1 ($200 - $100) and nothing for Week 2 ($100 - $200 is -$100, so the employee received more from the pool than was paid in).

Improper use of tip credits. If a tip pool is shared (a) with non-tipped employees, or (b) with owners, supervisors, or managers, then employers can't claim any tip credit, and therefore owe full minimum wage to any employees included in that tip pool (COMPS Order, 7 CCR 1103-1, Rule 1.10; C.R.S. § 8-4-103(6); 29 C.F.R. § 531.54(c)(3), (d)).

Example 6: A restaurant pools tips among waiters and cooks. It gives notice to customers and discloses to employees the preestablished basis for the tip pool. The cooks have no direct interaction with customers, making them non-tipped employees. This tip pool is not invalid because it is on a preestablished basis, with customer notice, and no owner or manager participation. But the tip pool includes non-tipped employees, voiding any use of the tip credit, so the employer must pay each tipped employee the full minimum wage. If the employer had claimed a $3.02 tip credit for its waiters, then it owes each waiter $3.02 for each hour worked over the duration of the improper tip credit.

Example 7: A restaurant claims a full $3.02 tip credit for its waiters, and it shares tips between waiters and shift managers. Because managers are included in the tip pool, this is both an invalid tip pool and an improper use of the tip credit, requiring two remedies: (1) Because the tip pool is invalid, the employer must ensure that each employee is paid the amount of tips they originally earned (contributions less distributions, for each workweek). (2) Because the tip credit was improperly used, the employer owes full minimum wage to each tipped employee, so it must pay them $3.02 for each hour worked over the duration of this improper tip credit.

Complaints: Employees can file complaints (INFO #2 explains the process), in the Division or court, if they are:

• denied any wages or compensation — including tips — they are owed;
• paid based on a tip credit an employer couldn't legally claim (e.g., from service charges instead of tips);
• made to contribute to an invalid tip pool; or
• paid less than the tipped minimum wage in their jurisdiction.

For More Information: Visit the Division website, call 303-318-8441, or email [email protected].

INFOs are not binding law, but are the officially approved Division opinions and notices on how it applies and interprets various statutes and rules. The Division continues to update and post new INFOs; email [email protected] with any suggestions. To be sure to reference up-to-date INFOs, rules, or other material, visit ColoradoLaborLaw.gov. Last updated December 18, 2025.