Unpaid Tips / Gratuities

According to the Labor Code, a “Gratuity” is referred to as a “tip, gratuity, or money that has been paid or given to or left for an employee by a patron of a business over and above the actual amount due for services rendered or for goods, food, drink, articles sold or served to patrons.”

Tips or gratuities are considered the sole property of the employee to whom they are given.

California Minimum Wage Requirements

2020 

  • $12 / hr (25 or fewer employees)

  • $13 / hr (26 or more employees)

 

2019 

  • $11 / hr (25 or fewer employees)

  • $12 / hr (26 or more employees)

2018

  • $10.50 / hr (25 or fewer employees)

  • $11 / hr (26 or more employees)     

 

2017 

  • $10 / hr (25 or fewer employees)     

  • $10.50 / hr (26 or more employees)

Are Mandatory Service Charges Considered a Tip?

Mandatory service charges are a predetermined amount that is automatically charged by an employer.  Therefore, mandatory service charges are not a tip.  Notwithstanding, an employer may have an established practice of paying this service charge to employees who provide table support to the patrons required to pay the service charge.  When employers opt to pay out this service charge, it takes the form of a bonus.

Who can share in the tip? Tip-Pooling?

California law allows involuntary tip pooling as long as those “in” the pool provide “direct table service.”  Employees who provide direct table service include wait staff, bussers, bartenders, and host/hostesses. Those who do not include: cooks, chefs, and dishwashers.

Employers and their agents, certain manager(s) and supervisor(s), are forbidden from receiving any portion of any gratuity left for its employees by a customer.  (Lab. Code § 351.) 

When Are Employers Required to "Tip-out" Credit Card Tips?

If a customer leaves a tip using a credit card, the employer must “tip-out” the employee no later than the next regular payday.  It is illegal for the employer to charge the employee a processing fee to receive their credit card gratuities.

 

What are Tips / Gratuities?

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