Do you know about Denver’s “tip credit?” 

 

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This month, Denver Labor closed a wage theft case for 14 restaurant workers who were paid less than Denver’s minimum wage in 2020, 2021, and 2022. My team recovered $77,969 in restitution for these employees, who work in an industry at high risk for minimum wage violations. 

Our investigations over the years have shown that wage theft is common in the food and beverage industry. One main reason businesses owe money to workers is that they miscalculate the tip credit. 

At the state level, employers can apply a tip credit to pay tipped workers less than the full minimum wage. But in Denver, this rule only applies to qualified workers in the food and beverage industry, not to workers in jobs like valet parking or beauty salons. 

Do you know about Denver’s “tip credit?” 

The tip credit lets businesses lower their minimum wage obligation by up to $3.02 per hour if they have proof that tipped workers get tips equal to the credit taken. No matter how much workers earn in tips, employers cannot reduce their minimum wage obligation by more than $3.02. In 2026, the minimum wage for tipped food and beverage workers will be $16.27 per hour, provided their tips bring them up to the citywide minimum wage of $19.29. 

In some investigations, such as those of strip clubs in Denver, we have found managers took tips from their workers. That is not allowed, and it’s considered wage theft. In addition, workers’ tips cannot be used to pay credit card processing fees or direct wages. Something to know as customers is that the mandatory 20% service charge some restaurants impose is not a tip, as customers cannot decide whether or how much to pay.

Do you know about Denver’s “tip credit?” 

Many workers have approached us with questions about the tip credit rules for pool sharing. If tips are shared between tipped and non-tipped workers, such as cooks or dishwashers, the employer cannot benefit from the tip credit and must pay employees the full minimum wage of $19.29. If this is the case, employers must inform workers in advance how tips will be distributed and the contributions of workers to tip pools. The business must also notify its customers in writing that tips left by customers will be shared among all employees. 

There are other unique scenarios where the tip credit may apply for part of a tipped employee’s shift. If this is the case for you, contact us. 

If you work in Denver and have questions about how the tip credit affects your payroll, email us at WageComplaints@DenverGov.org. 

They understand this topic can be confusing and are ready to help. 

 
 

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