Guides / Denver rules
Colorado tip rules for restaurants
In Colorado, tips belong to employees. Employers can take a tip credit of up to $3.02 an hour, but only when tips cover it. Tip pools are allowed with advance notice, but managers, supervisors and owners cannot take part. Mandatory service charges are not tips, and employers cannot take card processing fees out of tips.
- Tips are the employee's property.
- Tip credit: up to $3.02 an hour, only if tips cover it.
- Tip pools: allowed with notice. No managers, supervisors or owners.
- Service charges are not tips.
- No deducting card fees from tips.
Who owns tips in Colorado?
Colorado's Department of Labor and Employment (CDLE) states that gratuities are the sole property of the employee, except when they are shared through a valid tip pool. Tips must be paid to employees on time, like any other wages.
How does the tip credit work?
- The tip credit is capped at $3.02 an hour below the full minimum wage.
- Cash wages plus tips must reach the full minimum wage every workweek.
- In Denver, tip credits are limited to food and beverage workers. See Denver's minimum wage.
Who can be in a tip pool?
Tip pools are allowed when employees are told in advance how tips will be shared. Managers, supervisors and owners cannot take part. CDLE's guidance also explains that if a pool includes employees who don't normally receive tips, the employer cannot take a tip credit. Read CDLE INFO #3C for the full notice requirements.
Service charges vs tips
| Tip | Service charge | |
|---|---|---|
| Who decides | The guest | The restaurant, mandatory |
| Belongs to | Employees | The employer, unless paid out as wages |
| Counts toward tip credit | Yes | No |
| Disclosure | Not required | Required under Colorado's pricing law |
Colorado also requires mandatory fees to be clearly disclosed. See Colorado's service fee law.
Can I take card fees out of tips?
No. CDLE guidance says employers cannot use tips to cover credit card processing fees or similar costs. Pay out the full tip amount.
What records do I need?
- Tips left for each employee.
- Tips actually paid out after any pooling.
- Hours worked.
- Any tip credit claimed.
Questions owners ask
Can a shift lead share in the tip pool?
Not if they act as a manager or supervisor. Check their actual duties against CDLE guidance.
Can owners keep tips?
No. Owners cannot take part in tip pools.
Is an automatic 18% gratuity a tip?
No. A mandatory charge is a service charge, not a tip, and it must be disclosed.
Do tips on credit cards have to be paid the same day?
Tips must be paid timely, like wages, without forfeiture. Card tips are commonly paid with the next payroll.
See where your restaurant ranks on Google, free.
Get free report