Do You Depend on Tips? Know Your Rights

Many of California’s workers depend on tips to make ends meet. Unfortunately, many of these employees – restaurant workers, barbers, estheticians, and others –  do not understand their rights when it comes to this portion of their income. If you have questions about your tips, an experienced employment lawyer can provide the guidance you need.   

What Is Considered a Tip Under California Law? 

California law establishes three elements for tips. Tips are money that is: 

1. Paid, given to, or left for an employee;
2. By a patron of a business; and
3. Are in addition to what the patron is required to pay for goods, services, food, or drinks.

Under the law, cash left on the table for a waiter at a restaurant would count as a tip, assuming that it is over and above the total bill the customer must pay. This would also be the case for tips paid via credit card or cash handed to the waiter as the customer is leaving. 

In most cases, it is clear what is a tip and what is not. However, businesses are increasingly adding “serving charges” to their bills that the customer is required to pay. It is currently unclear under state law whether these charges are tips, but we note that certain cities have passed laws that require businesses to treat service charges as tips. 

Do Employees Have a Right to Their Tips? 

The short answer to this question is yes – employees have an absolute right to the tips that they have been paid. Under California law, tips are considered the property of the employee and given the following protections: 

• Employers may not take or claim any portion of an employee’s tips 
• Employers may not deduct an employee’s tips from their wages
• Employers may not credit an employee’s tips against their wages

As a result, employers cannot claim a portion of your tips as a house fee or something similar to pay for your uniform or other expenses. 

As for using your tips as a set-off against your wages, it is important to note that employers in California must pay employees at least minimum wage, even if they receive tips. As a result, if at the end of the night you made approximately $10.00 per hour in tips, your employer cannot then pay you an hourly wage of $5.50 (the current minimum wage in California is $15.50). Similarly, your employer cannot use your tips in calculating your overtime pay. 

Tips Paid Via Credit Card

As you are probably already aware, credit card companies charge a fee for every payment made using their card, typically as a percentage of the amount paid. This includes tips. As a result, some employers may try to deduct the credit card fee from your tips. This is prohibited by California law, and your employer is obligated to pay you the entire tip. 

The other issue that can arise with tips paid via credit cards involves when they are paid to the employee. When a customer pays your tip via credit card, there is a delay between when the tip is paid and when it is paid to you. Unscrupulous or disorganized employers can hold those tips longer than they should or simply lose track of them. California law requires that they be paid by the next payday, at the absolute latest. 

Tip Pooling

California does allow for tip pooling, where the business collects all of the tips paid over a certain period and then splits them evenly among the employees. However, there are a few details of note: 

• Tips may be shared with workers who do not have direct contact with the patron, such as bussers, bartenders, or other employees who are behind the scenes. 
• Tips may be shared only among employees, but cannot be shared with managers who have the authority to hire or terminate employees. This is because managers are considered agents of the employer, and the employer cannot claim a portion of an employee’s tips.
• However, tips can be shared with employees who have some supervisory duties such as shift supervisors. 
• Tips do not need to be shared equally among all employees. It is legal for employers to implement policies that dictate how they will be shared, such as based on the number of hours worked. Employers may also require that all or a portion of each employee’s tips must be shared. 

Has Your Employer Violated California’s Tip Laws?

Violations of California’s tip laws are considered to be misdemeanor offenses. As a result, your employer could face up to 60 days in jail and a fine of $1,000 if they are found guilty of violating the law.

A criminal conviction does not help the employee, however. Thankfully, employees have a variety of options available to them if they believe their employer has not paid them the tips they have earned or has otherwise violated California’s tip laws. 

Your best option may be to file a complaint with the California Labor Commissioner’s Office. Faster than litigation and more straightforward, the Commissioner’s Office will convene a hearing on the violation. If the Commissioner finds that your employer did violate the law, they will order your employer to pay whatever tips they owe you. The Commissioner may order your employer to pay additional damages if the violation resulted in you making less than minimum wage. 

Lastly, employees should also understand that it is illegal for their employer to take any retaliatory action against them for pursuing a legal claim for a tip violation. As a result, you should not hesitate to seek out an employment law attorney if you believe you are owed unpaid tips. 

Contact Attorneys for Employees if You Are Owed Tips   

Tip violations are very serious, even if the amount of money at issue is comparatively modest. You work hard for your money, and your employer should be held accountable. To discuss your case and how we can help, contact us today at 310-601-1330 to schedule a consultation.