California law prohibits employers from sharing in or keeping any portion of a gratuity left for or given to to an employee by a patron. California law also makes it illegal for employers to make wage deductions from gratuities, or from using gratuities as direct or indirect credits against an employee’s wages.
The Division of Labor Standards Enforcement (http://www.dir.ca.gov/dlse/), the California governmental agency responsible for overseeing wage and hour issues, has written the following about tips and gratuities.
Labor Code Section 351 prohibits employers and their agents from sharing in or keeping any portion of a gratuity left for or given to one or more employees by a patron. Furthermore it is illegal for employers to make wage deductions from gratuities, or from using gratuities as direct or indirect credits against an employee’s wages. The law further states that gratuities are the sole property of the employee or employees to whom they are given. “Gratuity” is defined in the Labor Code 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. It also includes any amount paid directly by a patron to a dancer covered by IWC Wage Order 5 or 10.
Question: What is a tip?
Answer: A tip is money a customer leaves for an employee over the amount due for the goods sold or services rendered. Tips belong to the employee, not to the employer.
Question: When a customer pays their bill with a credit card and the payment includes a tip, when can the employee expect to receive the money from the employer?
Answer: Payment of a gratuity made by a patron using a credit card must be paid to the employee not later than the next regular payday following the date the patron authorized the credit card payment. Labor Code Section 351
Question: My employer is deducting the credit card processing fees from my tips. Is this legal?
Answer: No. Labor Code Section 351 provides that the employer must pay the employee the full amount of the tip that is indicated on the credit card. The employer may not make any deduction for credit card processing fees or costs that are charged to the employer by the credit card company from gratuities paid to the employee.
Question: I work in a large restaurant as a waiter. My employer told me that I am required to share my tips with the busboy and the bartender. Am I obligated to do this?
Answer: Yes. According to a California court, Labor Code Section 351 allows involuntary tip pooling. Therefore, your employer can require that you share your tips with other staff that provide service in the restaurant. In this regard, it’s DLSE’s position that when a tip pooling arrangement if in effect, the tips are to be distributed among the employees who provide “direct table service.” Such employees could conceivably include waiters and waitresses, busboys, bartenders, host/hostesses and maitre d’s. Employees who do not provide direct table service and who do not share in the tip pool include dishwashers, cooks, and chefs, except in restaurants where the chefs prepare the food at the patron’s table, in which case the chef may participate in the tip pool. Additionally, tip pooling cannot be used to compensate the owner(s), manager(s), or supervisor(s) of the business, even if these individuals should provide direct table service to a patron.