
Under California Labor Code § 351, a gratuity, or tip, is defined as money left for an employee by a patron above the amount due for goods or services rendered. Tips are considered voluntary payments, distinct from mandatory service charges such as banquet fees, which are contractually required and belong to the employer. Unlike service charges, tips are the sole property of the employees for whom they are intended.
A tip is a voluntary monetary amount a customer gives to an employee as a gesture of appreciation for excellent service. Customers leave tips at their discretion, and these amounts are not negotiable or regulated by the employer. According to California labor laws, tips are additional payments made directly to employees by customers, separate from the wages paid by the employer.
The California Labor Code provides strong protections for tips to ensure they remain the exclusive property of employees. Gratuities are never considered the employer’s property, nor are they payments for services rendered by the employer. This distinction underscores the voluntary and personal nature of tips, which belong solely to the employees who earn them.
Can My Employer Take My Tips in California?
Can my boss take my tips in California? No, under California Labor Code § 351, employers and their agents are prohibited from taking or withholding any portion of gratuities left for employees by customers. This law explicitly declares that tips are the sole property of employees. Employers cannot confiscate tips for any reason, including to offset business costs, cover employee tardiness, or penalize workers.
California law ensures that tips left by customers are reserved exclusively for the employees who earned them. Employers are barred from using tips to credit against wages owed to employees. Any violation of this provision is considered unlawful and could result in penalties.
Furthermore, employers are not allowed to redirect or manipulate tips for their benefit. For example, they cannot deduct tips from an employee’s paycheck to cover expenses such as inventory losses or credit card processing fees. Labor Code § 351 was established to safeguard employees’ rights, ensuring gratuities remain untouched and fully owned by the workers who earned them.
How Long Can an Employer Hold Your Tips?
California Labor Code § 351 does not permit employers or their agents to retain gratuities beyond what is necessary to facilitate distribution. While employers can temporarily hold tips to process them or pool and redistribute them among eligible employees, any undue delay may constitute a violation of the law.
Under Federal Law (FLSA):
The Fair Labor Standards Act (FLSA) requires that tips be promptly distributed to the employees who earned them. Employers may not hold tips for longer than necessary for payroll processing or valid tip pooling arrangements. Unnecessary delays may violate federal law.
Example:
An employer collects tips from employees at the end of a shift for pooling and redistribution but delays payment for several weeks without a valid reason. Such delays could breach the FLSA, especially if they hinder employees’ access to their earnings.
California Requirements:
California law often imposes stricter timelines for tip distribution. For instance, tips must typically be included in the employee’s next scheduled paycheck. Employers who fail to distribute tips within the designated pay period may be violating California labor laws, which prioritize timely payment of all wages, including gratuities.
Is It Legal for My Employer to Deduct Credit Card Processing Fees From My Tips?
No, California law explicitly prohibits employers from deducting credit card processing fees from employees’ tips. When a customer leaves a tip using a credit card, the full tip amount must be paid to the employee without deductions for processing costs.
Labor Code § 351 ensures that employees receive the full gratuity amount left for them, regardless of the payment method used by the customer. Employers are responsible for absorbing any associated credit card fees. This rule reinforces the principle that tips are exclusively the property of the employees who earn them.
Do I Have to Share My Tips With Other Employees?
Yes, but only under specific conditions. California law allows employers to implement tip pooling arrangements that require employees to share tips with other staff members who are part of the service chain, such as bussers, bartenders, and food runners. However, such policies must exclude owners, managers, and supervisors who have hiring or firing authority.
Tip pooling ensures a fair distribution of gratuities among employees who contribute to the overall customer experience. Employers must ensure that these policies are reasonable and transparent, and they cannot retain any portion of the pooled tips.
Are Tips Part of My Wages?
No, tips are not considered part of your wages under California law. Since tips are given voluntarily by customers and not provided by the employer, they do not factor into the calculation of your regular rate of pay.
However, if an employer redistributes tips as part of a tip pool or includes mandatory service charges in your paycheck, those amounts may be classified as wages and are subject to taxation. This distinction is critical for compliance with tax and labor laws.
Are Tips Taxable in California?
Yes, tips are considered taxable income and must be reported on your tax return. The IRS requires employees to report all tips received, whether in cash, via credit card, or as non-cash items such as gift certificates or concert tickets.
Employers must also account for reported tips when calculating payroll taxes, including Social Security and Medicare. Accurate reporting of tips is essential to avoid penalties and ensure compliance with federal and state tax laws.
Are Tips Included in Overtime Pay Calculations?
No, tips are not included when calculating overtime pay. California law requires employers to calculate overtime based on an employee’s regular rate of pay, which does not include gratuities. This ensures that employees receive fair compensation for overtime work without relying on customer tips to meet wage obligations.
Are Service Charges Considered Tips?
No, service charges are not considered tips under California law. Unlike voluntary gratuities, service charges are mandatory fees added to a customer’s bill and belong to the employer. However, some local ordinances require service charges to be distributed to employees in specific industries, such as hospitality.
Can Employers Use Tips to Meet Minimum Wage Requirements?
No, California law prohibits employers from using tips as a credit toward meeting minimum wage obligations. Unlike federal law, which allows tip credits under certain conditions, California requires employers to pay employees the full minimum wage in addition to any tips earned.
What Can I Do If My Employer Violates Tip Laws?
If your employer violates California tip laws, you have several options:
- Document Everything: Keep records of your tips, pay stubs, and any deductions made by your employer.
- File a Wage Claim: Submit a claim to the California Division of Labor Standards Enforcement (DLSE).
- Consult an Attorney: Seek legal advice to determine whether to file a lawsuit or pursue other legal remedies.
California law protects employees from retaliation for reporting violations, ensuring that workers can assert their rights without fear of retribution. Holding employers accountable for unlawful practices helps maintain fair and equitable treatment in the workplace.
Understanding your rights regarding tips and gratuities in California is essential for protecting your income and ensuring compliance with labor laws. By familiarizing yourself with these regulations, you can confidently navigate any issues that arise in your workplace.