Tip Practices in California: What is Legal?
A tip in the workplace is an additional sum of money given to an employee as gratuity from a customer. It is not a wage given to an employee by an employer. Employers do not regulate tip amounts from patrons. A tip can be any amount the patron believes is appropriate for the good or service provided. Understanding lawful tip practices in California can help you protect your rights as a worker.
What is Tip Pooling?
Tip pooling refers to a workplace gathering all workers’ tips, combining the tips into a collective pool and then dividing them among all employees based on a pre-agreed-upon percentage system. A restaurant, for example, may collect all the tips made by its waitstaff in a shift and then divide it among other staff members at the end of the night, such as giving 5% of the pool to the host and 5% to back-of-house staff.
Tip pooling allows more employees at an enterprise to benefit from tips. Tip pooling is a legal practice in California as long as the establishment obeys related state laws. Tip practices must meet three main conditions.
- Only employees can participate in the tip pool.
- All tips included in the pool must have been given to employees.
- The tip pool cannot include the company’s managers, owners, or supervisors.
Although it is not technically part of state law, the general rule is that tip pooling must fairly and reasonably distribute tips to its employees. Failing to follow laws and best practices for tip pooling in California could lead to employer penalties, with a few exceptions, including having to pay wronged workers back wages.
What is Double Tipping?
Double tipping is a legal practice in California that describes an employee receiving gratuity from customers as well as money from mandatory service charges from an employer. Service charges are different from tips. They are charges added to some customers’ bills. Service charges belong to an employer, who may decide to keep the charges or distribute them to employees. Some local ordinances, however, make it mandatory for employers to pass service charges onto employees. This practice is known as double tipping. Service charges may lawfully go toward an employee’s minimum wage and overtime wages in California.
What is Tip Credit?
Tip credit refers to the practice of an employer crediting tips as part of an employee’s working wage. While this is legal in some states, it is expressly against the law in California. California Labor Code 351 states that no employer or agent shall require an employee to credit the amount of tips earned as part of his or her wages. The employee’s wage in California must be entirely separate from how much he or she makes in tips. An employee in Los Angeles County, for example, must make at least the minimum wage of $15 per hour. Any tips the worker receives are in addition to this wage, not credited against the hourly amount.
Legal Remedies for Unlawful Tip Practices
A business in Los Angeles may engage in unlawful tip practices unknowingly out of ignorance of the law. A company may also intentionally use illegal tipping practices to make money. Either way, the wronged employee has legal remedies available in California. If you have encountered any unlawful tip practices at work in LA, discuss your rights with an attorney.
- Calculating tips as part of an employee’s wages.
- Subtracting credit card fees from the employee’s tip.
- Failing to keep an accurate record of tips received.
- Failing to accurately distribute tips to employees.
- Dividing tip pooling money among nonemployees or managers/owners.
You are owed a lawful wage in California. This includes lawful and reasonable tip practices by your employer. If you have questions about the legality of a tipping practice, contact the wage and hour violation attorneys at Mathew & George for a free consultation in Los Angeles.