Many employees in food service and the hospitality business earn some of their income through tips. While it is true that employers have the right to require workers to pay into a tip pool, they may not do so in ways that violate an employee’s legal rights.
Every employer requiring workers to participate in tip pooling, or tip sharing, must be careful to observe the legal rights of employees because there are limits to who can participate in a tip pool and how much can be contributed to it. Knowing these tip laws and rights can go a long way for employees such as waitresses, bartenders, cleaning staff, and others who deal with tips on a daily basis.
Defining Tip Pooling in California
Tips have long been a form of compensation in addition to minimum wage or base pay set by state or federal labor codes for service workers. According to California Labor Law 351, a tip is considered a form of gratuity that is voluntarily left by the customer for the employee over the amount due for the goods or services rendered. They are the sole property of the employee.
Tip pooling or tip sharing is the practice of gathering the tips earned by certain employees, and dividing them with multiple other employees. Many service employees rely solely on tips for the bulk of their income, with some even earning more through tips than through basic wages. Some types of employees that typically receive tips are:
- Waiters and bussers
- Hosts
- Valet attendants
- Bartenders
- Housekeeping or cleaning staff
- Movers
- Delivery people
- Dancers
- Spa and salon owners
- Event planners
The way that the funds are divided up must be fair and reasonable, and typically follow an agreed-upon formula for the organization’s established tip pooling policies. Tip pools are often used in order to:
- Offset the differences in tip earnings between shifts that are peak hours and off-hours
- Reduce competition at work
- Lighten strain during the work day
California Law on Tip Pooling
In California, employer-mandated tip pools are generally legal if certain conditions are met. These conditions include:
- The individuals participating in the tip pool are employees.
- The tips included in the pool must have been given to the employees.
- The employer, managers, supervisors, and owner cannot share in the tip pool.
By definition, an employer is considered the employee’s boss with the power to:
- Fire or hire an employee
- Supervise, control, or direct what the employee does on the job
An employer must never require that the portion paid into the tip pool be more than a customary and reasonable share. Additionally, all tips should belong to the employee who earns them – not the employer. However, with a valid tip pooling arrangement in place, the employer may pool and distribute employees’ tips, but must observe the legal guidelines for doing so.
Employers cannot deduct hourly wages from tipped employees based on the amount of wages earned. This is known as a “tip credit” and is unlawful. According to California state law, all tipped workers in California must receive at least the state’s minimum wage, which is $15.50 as of 2023. Remember, tips are considered income but are not considered wages.
Tipped employees have a legal right to take cash tips home immediately. When the tip is through a credit or debit card, the tipped employee has a right to the full amount of the tip by the next payday. The employer cannot deduct any merchant fees or credit card processing fees from these types of kids. Employers also have a responsibility to:
- Keep a record of all of these tips
- Make the record available to the California Labor Commissioner’s Office
Illegal Tip Pool Arrangements and Your Rights
If you suspect your tip pool arrangement may be in violation of legal guidelines of tip pooling in California, it’s important to contact an attorney skilled in employment law. Many labor codes outline the limitations involved in tip pooling as well as the rights and remedies available when an employer engages in illegal tip pooling. An experienced attorney, familiar with the labor code in your state, can identify any tip laws that have been violated and give important advice about successfully pursuing a tip pooling case against your employer.
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It is illegal for an employer to participate in a tip pool or otherwise take any amount of tip money from an employee who earned it. Employers who violate gratuity and tip laws in California are guilty of a misdemeanor offense, which is punishable by:
- A fine of $1,000
- Up to 60 days in jail
- Restitution for the employee for the tips that were taken
Employees who believe that their employers are unlawfully taking wages should contact an attorney right away. An attorney can help you file a wage claim with the Labor Commissioner’s Office, which will trigger an agency investigation. The case will then by either references to a conference, references to a hearing, or dismissed.
If there is a hearing, the Labor Commissioner will order an Order, Decision, and Award (ODA). Alternatively, employees can fight to receive their rightful wages by taking the following civil actions:
- Bring a lawsuit for civil penalties under the Private Attorney Generals Act.
- File a lawsuit under California’s Unfair Competition Law (UCL).
- File a lawsuit against the employer for conversion.
- File a lawsuit for breach of contact.
Getting Help with Your Tip Pooling Case
The tips an employee earns are a precious source of income. Service workers who rely on tips should be aware that there are legal rights designed to protect tips and to ensure that employers correctly distribute both wages and money earned from tips.
To get help with your tip pooling case, contact the experienced attorneys at Shegerian & Associates. Our excellent team of attorneys, well-versed in employment law, is standing by to answer your questions and provide the sound legal advice you need today.
