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What Are the California Tip Laws?

Woman putting tips into glass jar on wooden table indoors, close

California’s labor laws protect employees. California workers benefit from a minimum wage, mandatory meal and rest breaks, overtime payment, and other protections. Some issues, however, are not always so clear-cut. Gratuities, or tips, paid by customers are meant to be voluntary, but in the U.S. it’s all but guaranteed in the service industry. Many states have decided that tips count towards wages, affecting wage and hour rights. Where does California stand? To learn about how California labor laws treat tips, read on. Call a California employment law attorney with any further questions about tips, minimum wage, and other employee rights or employer obligations.

In California, Tips Belong to the Employee

First and foremost, it’s important to know that in California, tips belong to the employee, not the employer. California employers cannot take any part of their employees’ tips. Employees cannot be forced to share tips with the company, with managers, or with supervisors. Those parties are considered agents of the company and thus cannot share in tips. Employers also cannot deduct any amount from an employee’s wages based on their tips received. An employer who violates the California tip law can be charged with a misdemeanor crime.

Tips Do Not Offset California Minimum Wage

Employers in every state are required to pay non-exempt employees a certain minimum wage. In many states, employers can offset their minimum wage requirements with tips received by their employees. Waiters and other tip-heavy employees can be paid less than the minimum wage required for other jobs so long as the employees earn enough in tips to make up for the reduced wage, still reaching the state minimum. This is not the case in California.

In California, as of January 1, 2022, the minimum wage for nonexempt hourly workers is $15 per hour for employers with 26 or more employees and $14 per hour for employers with 25 or fewer employees. Employers must pay non-exempt employees the minimum amount for each hour worked, regardless of how much they make in tips.

Tip Pooling is Allowed

California does, however, allow for “tip pooling.” Tip pooling occurs when the business collects the tips received by all employees and then splits those tips among the employees. This practice is allowed so long as it is only employees who share the tips and not managers who have the authority to hire and fire employees.

Tip pooling can include employees with certain supervisory duties, such as shift supervisors. At a restaurant, employees in the tip pool can include workers who do not provide table service, such as bartenders, hosts, and bussers.

What is a Tip?

Identifying what precisely counts as a “tip” is not as easy as it might first appear. What if there’s a “suggested” service charge? What if the service charge is mandatory, or otherwise added without asking the customer?

Under California’s tip law, a tip is money that is paid, given to, or left for an employee by a customer of the business and that is not part of the amount the customer was already required to pay for their food, drink, goods, or services. At the moment, mandatory service charges fall into a legal gray area. If the employer imposes a mandatory service charge, the rules are unclear. California courts have been split on the issue. Should a service charge be considered a tip, however, then the other rules regarding tips do apply. Certain cities in California, including Santa Monica, require businesses to treat service charges as tips.

If you are an employee with minimum wage or other employee rights concerns in Orange, Riverside, San Bernardino, Los Angeles, or San Diego counties, or a California employer dealing with wage and hour issues, employee contract disputes, or other employment law issues, contact a seasoned and thorough California employment law attorney at Coast Employment Law at 714-551-9930 for a free consultation.

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