• Nicholas Lansdown

Guide to Tip Pooling – Question and Answer

Updated: Jun 11, 2020

If you are in the service industry, there is no doubt that you depend on tips to bolster your income. California is very direct when it comes to tips and has concluded that it is the “sole property of the employee or employees to whom it was paid, given or left for." After all, you’ve earned it! This guide will cover some of the basic questions regarding Tips, Tip Pool, and mandatory service charges. If you have any more questions, feel free to contact me!


Q: What is a Tip?

A: Easy. Tips are exactly what you think they are – a token of appreciation left by a satisfied customer. A tip is any amount of money that exceeds the bill that is left. A tip is the SOLE property of the employee or employees it was left.


Q: When is my employer required to give me tips left on credit cards?

A: If a customer leaves a tip using a credit card, the employer must “tip-out” the employee no later than the next regular payday.


Q: Can my employer deduct a processing fee from tips that were left on credit cards?

A: Absolutely not! It is illegal for the employer to charge the employee a processing fee to receive their credit card gratuities. Labor Code Section 351 requires that employers pay the FULL tip to the employee.


Q: Is my employer allowed to make me share my tips with other servers? Bartenders? Bussers? Hosts/hostess?

A: Yes. Depending on your shift, this can be good thing or bad thing. Nevertheless, Labor Code Section 351 has authorized employers to create an involuntary “Tip Pool.” A tip pool, as you could guess, is the pooling and distribution of all the tips earned. The employer has the authority to create the pool’s perimeters and distribution but it has to be fair and is required to be split between the individuals who provide direct table support.


Q: Can my employer make me share my tips with the back of the house staff?

A: Yes. As long as your employer is paying you a wage that is at least minimum wage, your employer can create a tip-pooling policy that requires tips to be shared with back of the house staff. The tip policy must be fair and the server(s) should receive a larger portion of the tip pool. NOTE: if the employer is not paying you at least minimum wage, you suffer from unpaid wages, and need to consult with an experienced Unpaid Wages Employment Law Attorney.


Q: Are owners allowed to take a portion of my tip money? Managers? Supervisors?

A: Owners: No. Labor Code Section 351 is very explicit with this – “No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron.” The labor code does not care whether the owner provides direct table support or not, they cannot keep tips left for employees.

Manager and Supervisors: This is one of those tricky areas, again. Prior to 2018, the answer was no. However, in April 2018, the Department of Labor made the answer a little more murky. The DOL stated that to determine whether a manager or supervisor was an “agent,” it would use the exempt-employee status test, a fairly hard standard to meet. As such, lower-level supervisors may not meet the executive exemption requirements and could participate in the tip-pool. So, if this is your question, you should contact an experienced Tip-Pool Employment Law Attorney.


Q: Can my employer pay me less than minimum wage and use my tips to cover the difference?

A: No. California law requires that all employees be paid at least minimum wage. Unlike federal law, California employers are not allowed to offset their obligations with tipped earnings. If your employer is not paying you at least minimum wage, you may be owed unpaid wages and penalties. You should consider consulting with an experienced Unpaid Wages Employment Law Attorney.


Q: My tips are higher than my hourly rate. So, if I am required to work overtime, do my tips make my hourly rate higher?

A: Sadly, no. Tips are voluntary. Your employer is not obligated to match or compensate you for voluntary tips left by customers. As such, your tipped earnings will not be used to calculate your overtime rate. However, your circumstances may be different if your employer uses a mandatory service charge.


Q: Are Mandatory Service Charges considered at Tip?

A: No. As stated above, tips are voluntary. A mandatory service charges are a predetermined amount that is automatically charged by an employer and, therefore, is not a tip.


Q: Are Mandatory Service Charges included in my overtime rate?

A: Depends. As we know, mandatory service charges are not tips and belong to the employer. As such, the employer has the discretion as to whether to distribute the mandatory service charge. When the employer decides to distribute the mandatory service charge, it does so in the form of a bonus. With that in mind, bonuses would be included in the regular rate of pay when determining overtime rates.


Q: What should I do if my employer is taking my tips?

A: You should immediately attempt to determine the amount of tips that were wrongfully taken. If possible, locate any documents that support your findings. At that point, you could either file a wage claim (CLICK HERE) with the Labor Commissioners office or you could file a lawsuit. If you would like help getting everything you are owed, you could hire an experienced Tip-Pooling Employment Law Attorney.

At the end of the day, this is one scenario where you should not leave money on the table!

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Disclaimer: All materials have been prepared for general information purposes only to permit you to learn more about Lansdown Law, its services, and experience.  The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.