Guides / Denver rules

Colorado tip rules for restaurants

QUICK ANSWER

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 tipsEmployees
Max tip credit$3.02 an hour
Managers in tip poolNot allowed
Card fees from tipsNot allowed

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.

Federal update, September 2026A U.S. Department of Labor opinion letter also bars managers and supervisors from tip pools. A supervisor may keep only tips received directly and solely for service they personally provided.

Service charges vs tips

 TipService charge
Who decidesThe guestThe restaurant, mandatory
Belongs toEmployeesThe employer, unless paid out as wages
Counts toward tip creditYesNo
DisclosureNot requiredRequired 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.
Not legal or tax adviceThis page summarizes official public information as of October 1, 2026. It is not legal, tax or HR advice. Rules change, so confirm with the official source or a professional before you act.

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

Sources

  1. Colorado Department of Labor and Employment: INFO #3C, Tips and Tipped Employees Under Colorado Wage Law
  2. Rocky Mountain Employer: Department of Labor opinion on managers and tip pools (September 2026)