California’s 2025 tip pooling laws require fair distribution of tips among eligible service staff, excluding non-participating managers. Employers can mandate tip pools, but must not deduct credit card processing fees or violate minimum wage rules.
By Brad Nakase, Attorney
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As long as there are no managers in the pool who have the power to employ or dismiss you, tip pooling is permitted in California. Only managers who perform the same tasks as you are eligible to join the tip pool.
Here are four important points under California’s tip pooling laws:
A tip pool is a collection of money made up of all or part of the tips you and your colleagues have received. Following that, the fund is dispersed to each of you fairly and sensibly in accordance with approved tip pooling guidelines and a formula that has been agreed upon.
For such pools to be permitted by California tip pooling laws, they must:
Your boss is your employer. Anybody can be an employer’s agent.
Under tip pooling laws, your tips cannot be kept or withheld by your managers. An establishment-wide tipping pool, however, might be advantageous for an employer’s agent, such as a manager, provided they get a tip from a client and perform the same duties as you.
Example: A required tip pool is in place at a coffee establishment in Los Angeles. Pursuant to a formula, employees & shift supervisors receive the money remaining in the tip jar each week. Since shift supervisors have authority over what other workers do while on the job, they act as the employer’s agents. Nevertheless, they also do barista duties while on duty. The shared tip jar could come in handy for these shift bosses.
You may utilize tip pools as a service worker to:
Under tip pooling laws, employers in California are permitted to implement obligatory tip-pooling policies without breaking any labor regulations in the state. However, employers are not allowed to take money out of your hourly paycheck because of the amount of the gratuity you received, which is commonly referred to as the “tip credit.”
More protections are offered by this California statute than by the Fair Labor Standards Act. It makes sure you get at least the minimum pay set by the state. California’s minimum wage is currently $16.50 an hour (2025).
You can get cash tips right away.
You are eligible to receive the entire tip amount on your subsequent regular payday if the tip was paid using a credit or debit card. The employer cannot take any merchant or card processing expenses from your tip if they are assessed by the credit card provider.
Additionally, the employer is legally required to:
Accordingly, tips do not, in theory, count toward your pay. You must still record them as taxable income, though. Additionally, since tips do not alter your usual rate of pay, they will not affect your overtime rate.
Tips are usually given to the following employees:
Since compulsory “service charges” aren’t given willingly by the client, they are not considered tips in California. Customers may occasionally be subject to these service fees from employers. The employer is also responsible for these charges, and he or she can decide how to allocate them. (Take note that in some municipalities, service charges must be paid to you directly.)
If the money collected from compulsory service charges does end up in your pocket, it won’t constitute a gratuity or tip. On service charges, employers are required to withhold the Social Security & Medicare tax. In contrast to gratuities, service fees are also countable.
It is permitted in California to “double tip,” which is when you get both tips and service fees.
A misdemeanor is committed by employers that disregard the tip & gratuity provisions of the state’s wage & hour regulations. Among the penalties for violating tip pooling laws are:
The California DLSE (Division of Labor Standards Enforcement), the Labor Commissioner’s Office, is the place to file a wage dispute complaint if you think your employer is unlawfully meddling in the tip pooling laws or retaining tips. The agency will launch an investigation as a result.
After that, the case will either be:
After the hearing, an ODA (Order, Decision, or Award) will be served by the Labor Commissioner.
An appeal of the ODA will result in a conventional civil trial. If you are unable to pay for legal representation, the DLSE can act on your behalf.
The court will issue a judgment against the company if you prevail in the trial. This ruling may impose waiting time fines if you are no longer working for the company.
Remember that when you demand the tips or sue your boss to recover the same, your employer will not be able to do anything against you. Retaliation may be expressed in the form of punishment, depreciation, dismissal, or other abusive acts. In case your employer is retaliating, you can do two things: file a lawsuit or file a complaint of retaliation/discrimination with the Labor Commissioner’s Office.
Tip pooling is the practice of combining gratuities with coworkers who are “in the line of service,” with only you & the other coworkers receiving a share of the tip pool.
Giving a portion of the tips to back-of-house employees who do not receive tips is known as tip sharing. Examples of this include:
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