Everything You Need to Know About California Tip Laws

Know Your Rights Not To Be Underpaid Under California Tipping Laws

If you are like many employees in California, you rely on tips as part of your income. Waitpersons, bartenders, bell hops, hotel housecleaning staff, food delivery drivers, and taxicab drivers are just a few of the professions where workers receive tips from customers as part of their wages. These are often low-paying jobs, so receiving a good tip as well as the other wages an employer is required to pay can be crucial for workers to be able to pay the rent and feed their families.

No one should be underpaid—including you. Here is what you need to know about California’s tip laws to ensure that you are paid the proper wages by your employer.

What Is a Tip?

California Labor Law Section 351 governs your rights to your tips. It prohibits any employer or its agent from sharing in or keeping any portion of a gratuity left for or given to one or more employees by a customer. Here is what is considered a tip:

• A tip is defined as money a customer leaves for an employee over the amount due for the goods or services provided.
• A tip is the employee’s, and an employer has no right to it.
• Courts have expanded the definition of a tip to include a free gift or a present and emphasized that an essential criteria is that the customer has no obligation to pay or give them.

How Tips and Minimum Wage Laws Work

In California, you are the owner of your tips, and they are not considered part of your wages in determining the minimum wage you must be paid. Your employer must pay you the minimum wage under the state’s current law and cannot deduct your tips from the hourly minimum wages you are owed.

Can an Employer Require Tip Pooling?

Tip pooling is also referred to as “tipping out” and is where employees put their tips in one pot to be divided between the employees in the pool. Under California law, your employer is allowed to have an involuntary tip pooling policy. If you are a waitperson, this means that you could be required to share your tip with bartenders, staff that bus tables, and other employees. In order for the policy to be valid, it must meet these requirements:

• Only certain employees in the chain of providing services to a particular customer can be included in the tip pool. Using a restaurant as an example, waitpersons, bartenders, hosts and hostesses, and bussers could be required to pool tips. However, cooks, dishwashers, and cashiers would not be in the chain of services.
• Your employer, manager, or supervisor is not allowed to be part of the tip pool, even if this person is providing direct service to customers at their tables. However, the courts have ruled that some supervisors—like those at coffee shops and fast food restaurants—may be entitled to share in a tip pool if their primary duty is serving customers.
• The tips must be distributed to the employees in the pool in a fair and reasonable manner, with a fair decision being made as to the percentage of tip each worker receives based on the level of service to the customer.

The California Department of Labor Standards Enforcement (DLSE), which is the agency that enforces wage and hour laws, has set some guidelines on what is a fair pooling agreement for restaurant staff. It considers the following distribution to be legal: 80 percent to the waitperson, 15 percent to people bussing tables, and 5 percent to bartenders. However, the fairness of any tip pooling arrangement will be based on the facts of the particular work situation and is determined on a case-by-case basis.

Is a Mandatory Service Charge Considered a Tip?

Some businesses like restaurants and catering services charge mandatory service fees. A classic example is a 10 to 15 percent gratuity added to the cost of the bill for larger restaurant parties. These are considered contractually agreement payments between the customer and the business and not voluntary payments by the customer. Therefore, it is generally not a tip and is owed to the employer. Factors that can result in a service charge being considered a tip include:

• The payment is completely voluntary.
• The customer has total control over the amount of the payment.
• The employer cannot set the amount either in a contractual agreement or by a policy.
• The customer gets to decide who receives the payment.

If an employer distributes the service fee to employees, it would be considered a bonus to be included in the employee’s regular rate of pay. However, courts have not yet ruled on whether a service charge added to a restaurant bill should be treated as a service charge or tip, so this rule could change in the future.

Frequently Asked Questions About California’s Tipping Law

There are a number of other issues that can come up under California’s tipping law. Here are some frequently asked questions that you may have.

Can My Employer Deduct Tips From My Paycheck?

No. Your tips are legally yours. Your employer is not allowed to deduct your tips from your wages or credit them when determining how much he owes you.

Is it Legal for My Employer to Include My Tips in Calculating My Hourly Wage?

No. In California, an employer is prohibiting from crediting tips toward his obligation to pay an employee the minimum wage. You are entitled to be paid the hourly minimum wage by your employer and to keep your tips in addition to your wages.

Is it Legal for My Employer to Deduct Credit Card Fees From My Tips?

No. California’s Labor Code requires employers to pay employees the full amount of the tip listed on the credit card slip.

If a Customer Pays His Bill by Credit Card and the Payment Includes a Tip, How Soon Must My Employer Pay it to Me?

Your employer should pay you your tips no later than the next scheduled pay date after the date the customer added the tip on the credit card slip.

What Are Your Remedies If Your Employer Violates California’s Laws on Tipping?

If your employer is violating California’s tipping laws, he faces both civil and criminal consequences. Violating these laws is considered a misdemeanor punishable by a fine of up to $1,000 or 60 days in prison. As part of the sentence, the judge could order your employer to compensate you.

You have two options for pursuing your legal remedies. You can file a civil lawsuit against your employer or file a wage claim. Both have their pros and cons.

An important benefit of filing a lawsuit is that you would have greater procedural protections. For example, in an administrative wage claim, the formal rules of evidence do not apply, making it easier to admit potentially harmful evidence. In addition, in a civil lawsuit, you can obtain documents helpful to your claim that your employer refuses to give you through a formal discovery process.

The drawback of filing a lawsuit is that it could be more expensive and time-consuming. However, if you have a substantial claim, this could be beneficial. In addition, because of the additional costs to your employer, filing a lawsuit could result in your receiving a higher settlement. However, this would depend on the facts of your case.

Filing an administrative complaint can be cheaper and quicker. However, if your claim is worth more money, you could prefer the procedural protections of a civil lawsuit that may make proving your claim easier.

What Should Your First Step Be If You Suspect Your Employer Is Violating California’s Laws on Tipping?

If you believe that you are not being paid the tips you are entitled to, you want to contact an experienced employment law attorney as soon as possible. California has strict and somewhat confusing statutes of limitation for filing an administrative complaint or civil lawsuit that you do not want to miss. In addition, an attorney can advise you on whether filing an administrative or civil complaint is your best option. Start an online chat or call the Law Offices of Corbin H. Williams today at 949-679-9909 to schedule a free, no-obligation consultation to discuss your situation.