On November 5, 2024, Massachusetts voters decisively rejected Question 5, a ballot initiative that sought to increase the minimum wage for tipped employees, aligning it with the standard minimum wage for all workers in the state. This measure proposed to gradually raise the base wage for tipped workers until it matched the state’s minimum wage, without taking into account tips. By rejecting this proposal, Massachusetts voters have chosen to retain the current two-tiered wage structure, which maintains a lower base wage for tipped employees, provided their total earnings meet or exceed the minimum wage through tips. Background on Question 5 and Its Potential Impact Question 5 was designed to phase out Massachusetts’ separate tipped minimum wage over several years. Currently, Massachusetts General Laws Chapter 151, Section 7 allows employers to pay a lower “service rate” to employees who regularly receive tips, which stands at $6.75 per hour. Under this law, employers are obligated to ensure that tipped employees’ total compensation, combining the service rate and tips, meets the state’s minimum wage, which is $15.00 per hour under Chapter 151, Section 1. If tips fall short, the employer must make up the difference. The proposed law under Question 5 would have gradually raised the hourly wage for tipped workers until it was equal to the general minimum wage, eliminating the current requirement that tips make up the difference. By doing so, it aimed to provide tipped employees with a stable, predictable income without relying on tips to reach the minimum wage. Legal Implications of the Rejection for Employers With Question 5 rejected, Massachusetts employers will continue to follow the current requirements for tipped employees as outlined in Chapter 151, Section 7 and Chapter 149, Section 152A. Key legal implications include: Employers must continue to ensure that tipped employees’ combined wages, including tips, meet or exceed the state minimum wage. If employees’ tips do not reach this threshold, employers are responsible for covering the difference under Chapter 151, Section 7. Under Chapter 149, Section 152A, tips are strictly the property of employees, and employers must comply with state laws on tip pooling and distribution. Although Question 5 was rejected, discussions around tipped wages and fair compensation may lead to future legislative initiatives. Employers should remain aware of potential changes to ensure ongoing compliance with evolving wage laws. For businesses operating in multiple states, Massachusetts’ approach to tipped wages differs from states that mandate a single minimum wage for all employees, such as California. Employers must ensure they meet Massachusetts’ specific tipped wage regulations alongside other state laws. Compliance Recommendations for Massachusetts Employers With the tipped minimum wage system remaining in place, employers should continue to prioritize compliance through practical measures: • Regular Wage and Tip Audits: Conducting audits of tipped employees’ earnings can help verify compliance with Chapter 151, Section 7 and prevent potential wage claims. • Clear Tip Policies: Transparent policies regarding tip handling, tip pooling, and service charges are essential under Chapter 149, Section 152A to minimize disputes and ensure compliance. • Management Training: Employers should provide regular training for managers overseeing tipped employees to ensure they understand wage and hour regulations and maintain lawful tip and wage practices. Looking Ahead Massachusetts voters’ choice to reject Question 5 retains the current wage structure for tipped employees, but ongoing discussions around fair compensation may drive future proposals. Employers should monitor legal developments closely and work with legal counsel to ensure compliance with Massachusetts wage laws as the regulatory landscape continues to evolve. If your business has any questions on this topic and would like further guidance on Massachusetts wage compliance, or any other matters please do not hesitate to contact the attorneys at The Royal Law Firm at 413-586-2288.