Employees that wait on tables, mix and serve drinks, and clean hotel rooms rely on tips to make a living in California. From understanding what constitutes a tip to determining whether you have to contribute to a tip pool, some California employment laws cover tipped employees.
The Legal Fundamentals of Tips in California
The most important legal fundamental concerning gratuities is that the tip money earned by employees belongs to them, not their employers. According to California employment law, your employer cannot take any percentage of your tips. You do not have to share your tips with the owner, managers, or supervisors of the business where you work.
Your employer also cannot count the tips that you earn towards the minimum wage obligations the employer must comply with in California. In many other states, employers can pay a lower minimum wage, as long as the hourly wage and the compensation earned in tips match the state’s minimum wage. However, California employment law prohibits employers from taking tip credits against the state’s minimum wage. For example, if you wait tables at a restaurant that has fewer than 25 employees in Malibu, CA, your employer must pay you the entire California minimum wage of $14.25 per hour
California Law and Tip Pooling
The concept of tip pooling is a controversial one for many workers that rely on tips for income. The thought of sharing tips with other workers that might not have generated as much tipped revenue is off-putting for some service industry workers. Nonetheless, California employment law permits tip pooling, which means you should understand what the concept means for tipped employees.
California law allows only certain workers to participate in a tip pool. Qualified employees for a tip pool must contribute to the “chain of service” that produces a tip from a customer. The restaurant industry offers a look into why tip pooling can be complex to define. Servers, bartenders, bussers, and hosts typically qualify for participating in a tip pool because they contribute to the “chain of service.” On the other hand, tip pooling can exclude cooks and dishwashers.
The second legal aspect of tip pooling is California law requires tips to be pooled in a fair and reasonable manner. What fair and reasonable is depends on how the owner of a business sets up a tip pooling arrangement. In our restaurant example, servers typically get the majority of tips that are pooled because they are the most influential part of the “chain of service.”
What About Mandatory Service Charges?
From moving companies to boutique hotels, some businesses tack on what is called a service charge on the end of a bill or invoice. Is a mandatory service charged considered a tip? California law does not consider a mandatory service charge as a tip. This means owners and managers can dip into a mandatory service charge for income because the state does not consider the charge a gratuity that should go exclusively to the employee who provided the service.
For money to count as a tip rather than a mandatory service charge, the following factors must come into play:
- Payment completely voluntary
- The amount of money cannot be set by employer policy
- Amount of money cannot be agreed upon through negotiation
- The customer has the unrestricted right to determine how much money to pay
- The customer has the unrestricted right to determine who receives the money
If you are a tipped employee and believe you have been deprived of your legally rightful income, call the PLBH Law Firm at (800) 435-7542 or submit the online form to schedule a free case evaluation.