Your Tips Are Your Sole Property Under Minnesota Law, and a Service Charge Is a Tip Unless the Customer Was Told Otherwise in Bold Type

The statute starts from ownership, not from fairness

Most tip disputes are argued as though the question were what is reasonable. Minnesota’s statute does not ask that. It assigns the money. Minn. Stat. § 177.24, subd. 3:

For purposes of this chapter, any gratuity received by an employee or deposited in or about a place of business for personal services rendered by an employee is the sole property of the employee. No employer may require an employee to contribute or share a gratuity received by the employee with the employer or other employees or to contribute any or all of the gratuity to a fund or pool operated for the benefit of the employer or employees. This section does not prevent an employee from voluntarily sharing gratuities with other employees. The agreement to share gratuities must be made by the employees without employer coercion or participation, except that an employer may:

(1) upon the request of employees, safeguard gratuities to be shared by employees and disburse shared gratuities to employees participating in the agreement;

(2) report the amounts received as required for tax purposes; and

(3) post a copy of this section for the information of employees.

Four things are stacked in that paragraph, and each one does work.

“Sole property of the employee.” Sole, and property — not a benefit the house confers and can condition.

The prohibition runs in both directions. The employer may not require sharing with the employer, and may not require sharing with other employees. A house rule that redirects server tips to the kitchen is the second half of that sentence.

Voluntary sharing is expressly preserved — but with a condition attached to the process, not the outcome. The agreement “must be made by the employees without employer coercion or participation.” An arrangement drafted by management and presented to staff is participation on its face.

The three permitted employer acts are an exhaustive list in the statute’s own structure. The employer may hold and disburse a pool the employees asked it to hold, report the amounts for tax purposes, and post the section. Nothing on that list is a share.

The administrative rule tightens the same point. Minn. R. 5200.0080, subp. 4: “Pooling or sharing of gratuities may not be a condition of employment. An indirect service employee who benefits because the recipient shares the gratuity with him or her shall not have the remuneration considered in the calculation of his or her wages.” Subpart 6 supplies the vocabulary: a “direct service employee” is “one who in a given situation performs direct service for a customer and is to be considered a tipped employee,” while an indirect service employee “is a person who assists a direct service employee, these include, but are not limited to, bus people, dishwashers, cooks, or hosts.”

Splitting among direct service employees is expressly fine. Subpart 8: “When more than one direct service employee provides direct service to a customer or customers in a given situation such as banquets, cocktail and food service combinations, or other combinations, money presented by customers, guests, or patrons as a gratuity and divided among the direct service employees is not a violation of Minnesota Statutes, section 177.24, subdivision 3.”

The Department of Labor and Industry publishes one further position that does not appear in the statute or the rule, and it should be read as the Department’s view rather than as enacted text: “Dividing money left in a tip jar, or the equivalent of a tip jar, among direct service employees working on the same shift is not a violation of Minnesota tip laws and related case law. A ‘shift’ means a period of time in which a particular group of employees work together to provide direct service to customers.”

Tips are also not a substitute for the wage. Minnesota allows no tip credit at all — § 177.24, subd. 2 — which is on minimum wage and the tip credit.

The manager in the pool

29 U.S.C. § 203(m)(2)(B) is a federal floor that operates in Minnesota regardless of the state’s refusal of the tip credit:

An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.

The remedy attached to it is unusually specific. 29 U.S.C. § 216(b): an employer that violates § 203(m)(2)(B) “shall be liable to the employee or employees affected in the amount of the sum of any tip credit taken by the employer and all such tips unlawfully kept by the employer, and in an additional equal amount as liquidated damages.” A Minnesota employer that lets a supervisor into the pool is exposed under both regimes at once.

Card tips: the whole amount, on time

Subdivision 3a does three separate things, and only the first is the one people notice.

No processing deduction. “[T]he full amount of gratuity indicated in the payment” — the number the customer wrote, not that number net of the processor’s cut.

A crediting rule. The tip belongs to the pay period in which the employee receives it. That prevents an employer from smoothing card tips across periods or holding them against a future slow week.

An outside deadline. Distribution “no later than the next scheduled pay period.” An establishment that settles card tips monthly while running payroll every two weeks is late under paragraph (b) whether or not it eventually pays in full.

If you worked for tips before August 2024 and your statements showed a percentage taken off card tips, the question is what has happened since August 1, 2024 — the repeal is not retroactive on its face and this page does not treat it as though it were.

The service charge

This is the dispute that decides banquets, large parties, and catering, and the answer sits in a definition rather than in a prohibition. Minn. Stat. § 177.23, subd. 9:

“Gratuities” means monetary contributions received directly or indirectly by an employee from a guest, patron, or customer for services rendered and includes an obligatory charge assessed to customers, guests or patrons which might reasonably be construed by the guest, customer, or patron as being a payment for personal services rendered by an employee and for which no clear and conspicuous notice is given by the employer to the customer, guest, or patron that the charge is not the property of the employee.

Read the structure rather than the length. An obligatory charge that a customer would reasonably read as payment for personal service is a gratuity — and therefore the employee’s sole property under § 177.24, subd. 3 — unless the employer gave clear and conspicuous notice to the contrary. The default runs to the employee. The notice is the exception, and it is the employer’s to have given, in a form the customer actually received — which under the rule may be the menu, a placard, the front of the bill, or other printed material.

The rule fills in both halves. On what counts as an obligatory charge, Minn. R. 5200.0080, subp. 4a: for purposes of § 177.23, subd. 9, such charges “include, but are not limited to, service charges, tips, gratuities, and/or surcharges which are included in the statement of charges given to the customer.” On what counts as notice, subp. 4b:

For purposes of Minnesota Statutes, section 177.23, subdivision 9, clear and conspicuous notice that the obligatory charge is not a gratuity is notice clearly printed, stamped, or written in bold type on the menu, placard, the front of the statement of charges, or other printed material given to the customer. Type which is at least 18 point (one-fourth inch) on the placard, or 9 point (one-eighth inch) or larger on all other notices is clear and conspicuous.

Eighteen point on a placard. Nine point or larger on a menu, a check, or a contract. Printed, stamped, or written in bold type, on material the customer actually got.

A second statute talks to the customer, not to you

Since January 1, 2025 — and since June 1, 2025 “for industries where the prices are regulated by the Metropolitan Airports Commission” — Minnesota also regulates how a mandatory charge is displayed, independently of who ends up with the money. Which of the two dates governs a given establishment turns on that regulatory question, and answering it is not what this page does. Minn. Stat. § 325D.44, subd. 1a(a), makes it a deceptive trade practice when a person “advertises, displays, or offers a price for goods or services that does not include all mandatory fees or surcharges.” Paragraph (b) defines a mandatory fee to include one that “must be paid in order to purchase the goods or services being advertised,” that “is not reasonably avoidable by the consumer,” or that “a reasonable person would expect to be included in the purchase of the goods or services being advertised,” and excludes “taxes imposed by a government entity on the sale, use, purchase, receipt, or delivery of the goods or services.”

Restaurants got a compliance path rather than an exemption. Paragraph (h):

A food or beverage service establishment, including a hotel, is compliant with this subdivision if, in every offer or advertisement for the purchase of a good or service that includes pricing information, the total price of the good or service being offered or advertised includes a clear and conspicuous disclosure of the percentage of any automatic and mandatory gratuities charged.

These are two obligations with two different beneficiaries, and an establishment can satisfy one while violating the other. Section 177.23, subd. 9, asks whether the employee gets the charge. Section 325D.44, subd. 1a, asks whether the customer was told about it. Subdivision 1b exempts certain motor vehicle dealer fees, businesses and affiliates regulated by the Minnesota Public Utilities Commission, and settlement-service charges under the Real Estate Settlement Procedures Act other than real estate broker commissions and fees.

Nothing may be deducted out of the tips either

Section 177.24, subd. 4, provides that deductions “from wages or gratuities” not authorized by the subdivision itself “may only be taken as authorized by sections 177.28, subdivision 3, 181.06, and 181.79.” It caps the uniform and equipment deductions it does authorize, and provides that “[n]o deductions, direct or indirect, may be made for the items listed below which when subtracted from wages would reduce the wages below the minimum wage.” Subdivision 5 requires reimbursement of the full amount deducted at the end of employment. The mechanics are on deductions from your pay.

Remedies, and the clock

Restitution through the commissioner. Section 177.24, subd. 3, carries its own remedy in its last two sentences: “The commissioner may require the employer to pay restitution in the amount of the gratuities diverted. If the records maintained by the employer do not provide sufficient information to determine the exact amount of gratuities diverted, the commissioner may make a determination of gratuities diverted based on available evidence and mediate a settlement with the employer.” That second sentence is the one that matters to a worker who kept no records: inadequate employer records shift the determination onto available evidence rather than defeating the claim.

A compliance order. Section 177.24 falls inside §§ 177.21 to 177.435, the range the commissioner may enforce by order under § 177.27, subd. 4. An employer contesting the order must file a written objection within 15 calendar days of service or the order becomes final. Subdivision 7 then requires the commissioner to order the employer “to pay to the aggrieved parties back pay, gratuities, and compensatory damages … and for an additional equal amount as liquidated damages,” with an additional civil penalty of up to $10,000 per violation per employee for repeated or willful violations.

Your own action. Section 177.27, subd. 8, allows a suit “directly to district court” for violations of §§ 177.21 to 177.44, and makes the employer liable “for the full amount of the wages, gratuities, and overtime compensation … and for an additional equal amount as liquidated damages.” Under subd. 9 the action “may be brought by one or more employees.” Under subd. 10, costs and attorney fees are mandatory.

Records. Section 177.30 requires three years of pay records kept “in the premises where an employee works,” with fines of up to $1,000 per failure and up to $5,000 per repeated failure, and paragraph (d) repeats the available-evidence rule for back wages.

The deadline. Two years under Minn. Stat. § 541.07(5), three “if the employer fails to submit payroll records by a specified date upon request of the Department of Labor and Industry or if the nonpayment is willful and not the result of mistake or inadvertence.” Compare it against the others on every Minnesota employment deadline in one table.

Currency

The Revisor publishes the 2025 edition of the statutes. A Table 2 query run against § 177.24 on September 8, 2026 returns ten rows with no action in the 2025 or 2026 sessions; the newest is Laws 2024, ch. 110, art. 7, § 1, adding subd. 3a. The same query against § 177.23 returns four rows, none touching subd. 9 — its History line ends “2024 c 110 art 6 s 1,2,” and those two sections added subds. 12 and 13. Section 325D.44’s Table 2 result shows subds. 1a and 1b added by Laws 2024, ch. 111, §§ 1 and 2 — each carrying the clause “This section is effective January 1, 2025, except that this section is effective June 1, 2025, for industries where the prices are regulated by the Metropolitan Airports Commission” — and subd. 1a amended once since, by Laws 2025, ch. 20, § 247; that amendment reaches only paragraph (j), the Federal Communications Commission cross-reference, leaving paragraphs (a), (b), and (h) as enacted. Minn. R. 5200.0080 was published electronically September 11, 2024 and carries subp. 7 as “[Repealed, L 2024 c 110 art 7 s 10]”; the quoted text of the repealed subpart is taken from the prior rule version, published electronically June 15, 2011, which the Revisor still posts on the section’s version list at the archive timestamp 2014-01-18.

What this page does not do

This describes who owns a gratuity and what has to be true for a service charge not to be one. It does not tell you whether a particular banquet contract carried the notice the rule requires, whether a particular pool was voluntary, or what a specific employer owes — applying these rules to your own shifts is not what this page does. If the underlying question is whether you are an employee at all, start at misclassified as a contractor; if it is whether raising the question got you fired, start at was my firing illegal.