Tip Laws in California

California law prohibits employers from sharing and distributing tips with supervisors and managers. Employers that violate California tips law often face employee lawsuits exceeding $100,000 in damages.

Brad Nakase, Attorney

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California Tips Laws – In California, tips given to employees belong to the employees. It is unlawful for employers (including managers and supervisors) to share any portion of customers’ tips given to employees. Labor Code Section 351 prohibits employers from sharing in or keeping any portion of a tip given to one or more employees by a customer. Additionally, the employer may not deduct an employee’s wage from the tips; it is illegal for employers to use tips as a credit against an employee’s pay.

What is a tip in California?

A tip is money that has been given to an employee by a customer of a business. A tip also includes money paid by a customer to a dancer. (IWC Wage Order 5 or 10) “Gratuity’ includes any tip, gratuity, money, or part thereof that has been paid or given to or left for an employee by a patron of a business over and above the actual amount due the business for services rendered or for goods, food, drink, or articles sold or served to the patron.”

Can my boss take my tips in California?

No. California tips law prohibit an employer, supervisor, or manager from taking, collecting, receiving any portion of an employee’s tips given to a worker by a customer. Owners, supervisors, and managers may not take or withhold a portion of tips.

Is it legal for my employer to deduct the credit card processing fees from my tips?

No. The employer must pay the employee all the tip money that is written on the credit card. It is illegal for the employer to subtract the credit card processing costs from the tip money.

Under California Tips Laws, Do I have to share my tips with a busboy and the bartender?

Yes.  A tip is money that belongs to the employee(s) “every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for”. (Labor Code Section 351) The courts have interpreted the law to allow tip pooling; however, tip pooling does not extend to managers, supervisors, or the owner(s) of the business even if these people served the customers.

Example: A restaurant requires that all servers give 10% of their tips to the manager. The is illegal. Likewise, it is illegal for a restaurant manager takes 10% of the tips and distribute the rest to the servers, bar tender, and busboy.

These policy reasons extend to mandatory tip pools, which include employees who do not provide direct table service but participate in the chain of service. Dishwashers and other kitchen staff are encouraged to give their best possible service as they know they will participate in the financial rewards if the customers are pleased with their work, even though the customers do not personally see them doing it. And a mandatory tip pool makes certain that these employees receive their fair share when the patrons are pleased with their service but have no way to tip them directly.

Are tips part of my hourly pay for overtime calculations?

No. The employer is required to pay the employee overtime. The tip money does not come from the employer; therefore, the tip money is not part of calculating overtime pay.

Is a service charge by a restaurant considered a tip or gratuity given to employees?

No. A tip is when a customer voluntarily leaves money for an employee. A service charge by a restaurant is money a customer is required to pay by the restaurant or business.

Example 1: Tasty Bistro charges a 10% service fee to John Doe’s $100 dinner. The John Doe is required to pay the $10 service charge. The $10 is not voluntary money left for the employees. Therefore, when Tasty Bistro at its discretion distributes any or all of the service fee to its employees, the money is considered a bonus. The bonus money must be included in the regular hourly rate of pay when calculating hourly overtime rate.

Example 2: Hotel Awesome charges its customers a $50 service charge; the Hotel is free to do whatever it wants with the service charge. “Because the service charge is mandatory and because the hotel is free to do with the charge it as it pleases, the service charge is simply not a gratuity which is subject to the discretion of the individual patron.”  The hotel is free to retain for itself all or some of the service charge or to give some portion of the service charge to the employees.

Is it legal for my employer to deduct tips from my paycheck?

No. Your employer cannot keep any of your tips. Your employer cannot deduct money from your paycheck because of the tips you received. Your employer must pay you the full amount of your paycheck regardless of how much tips you received.

Is it legal for my employer to include my tip money as part of the minimum wage?

No. California law prohibits employers from using tip money as part of calculating minimum wage. An employer must pay the minimum wage regardless of the amount an employee received in tip money. (Labor Code Section 351)

Example: Employee John’s is a waiter, and his wage is $15 per hour. John worked 6 hours for the employer; John’s wage for the day is $90. John received $50 tips from customers. John made $140 for the day’s work, which is $90 in wage + $50 in tips.

Is it a crime for my employers to violate the Tip and Gratuity laws?

Yes. Any employer who violates any provision of this article is guilty of a misdemeanor, punishable by a fine not exceeding one thousand dollars ($1,000) or by imprisonment for not exceeding 60 days, or both. (Labor Code, § 354) You may learn more about California Tips laws from the Labor Commissioner.

What can I do when my employer violates tip and gratuity laws?

Take a stand. You can hire a lawyer to help you secure restitution from your employer for unlawful business practices. The employer has to pay you restitution for tip money taken from you.

If you have questions regarding tips, please contact this law office for a free consultation: 619-550-1321.

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