California law defines a "tip" as any amount of money that is given to or left for an employee by a customer of a business, which is not part of the amount that the customer was required to pay for the goods and/or services. The state's labor laws specifically state that employees have the right to keep any tips they earn. Under California Labor Code Section 351, it is unlawful for employers to withhold or take any portion of employees' tips, to offset tips against regular wages or to require that workers share tips with owners or managers.

It is important to note that the law recognizes tips as separate and distinct from wages. Violating California tip laws in a crime. Employers who do so may face misdemeanor criminal charges and financial penalties. If you believe that your employer has stolen or shortchanged you in terms of tips, you have the right to file a complaint with the California Labor Commissioner's Office, which can then order employers to pay you back the tips that were unlawfully withheld or taken. An experienced Los Angeles wage and hour lawyer can help you better understand your legal rights and options.

Tips and California Minimum Wage

California Labor Code Section 351 also states that the amount that a worker earns in tips cannot count toward the minimum wage. California's minimum wage only includes what an employer pays an employee, not tips that are left by a customer. As of Jan. 1, 2023, the minimum wage in California is $15.50 an hour. That amount is higher in Los Angeles County and some other cities and counties across the state.

In such cases, your employer is required to pay you the minimum wage rate that is higher. Workers in California who earn much if their income in tips such as restaurant workers, nail salon employees and others, must still be paid the minimum wage. Employers also cannot substitute overtime pay or rest or meal breaks with tips.

Can Employers Withhold Credit Card Fees on Tips?

When customers use services at a restaurant or a beauty salon, they often tend to pay using a credit card. It is the employer's duty to pay all credit card fees on tips. This means that it is illegal for your employer to deduct or withhold the amount of a credit card fee from your tips. You are entitled to receive the entire amount of the tips left by a customer. In addition, when a customer tips an employee using a credit card, those tips must be paid by the next payday, under Labor Code 351.

Can Managers Take Tips?

California law allows for "tip pooling" when a business collects all the tips workers receive and splits them evenly. However, tip pooling is lawful only when they are distributed among employees and not managers or supervisors who have the authority to hire and fire employees. However, workers who have some supervisory duties such as restaurant shift managers or those who don't provide table service such as busboys or hosts may also be part of this pool.

Tips Versus Service Charges

Service charges are amounts of money a customer is required to pay as opposed to tips, which are voluntary. Service charges are not considered as tips and employers keep the money from these charges for themselves. However, if a local law specifically states that service charges are tips, employers are required to give them to their employees. Business owners or managers cannot keep them. In fact, some California cities such as Santa Monica and Berkeley require some businesses to treat service charges as tips. This means that in such jurisdictions, service charges must be given to employees who are actually providing the services.

What Can You Do if Your Employer Violates California Tipping Laws?

Employers who violate Labor Code Section 351 can face misdemeanor criminal charges and up to $1,000 in fines. Employers must also keep detailed and accurate records regarding the tips they receive from customers. Under the law, employees cannot file a lawsuit against their employers, but do have other legal remedies such as suing an employer for conversion.

This means that the employee is alleging that the employer stole his or her tips. As an employee, you can also file a lawsuit against California's Unfair Competition law because not adhering to tip laws can amount to a form of unfair business practice. Employees can also file a lawsuit alleging breach of contract stating that the employer breached an agreement with its customers to give all tips to workers.

Last but not least, you can file a complaint with the California Labor Commissioner's Office alleging a tip law violation. The office will hold a hearing, which is much more expedient than a court hearing. If you complaint is successful, the commissioner will order the employer to pay you what you are owed in unpaid tips. You may be eligible to receive additional liquidated damages if the tip law violation led to you getting paid under the minimum wage.

There are statutes of limitations or filing deadlines for these different actions. A conversion lawsuit must be filed within three years of the employer breaking the law. A tip violation lawsuit under the state's unfair competition law must be filed within four years and a breach of contract lawsuit must be filed within two years (in case of an oral agreement) and four years (if it was a written agreement). Labor Board complaints should be filed within three years of the tip law violation.

Retaliation is Unlawful

It is illegal for your employer to retaliate against you for reporting tip violations or for filing a complaint alleging tip law violations. Retaliatory action by an employer may include firing, demotion, pay cuts, transfer or any type of action that adversely affects you. If you are terminated because of your tip violation complaint, you may be able to file a wrongful termination lawsuit.

If your employer has withheld tips, stolen your tips or has retaliated against you for reporting a tip violation, contact an experienced Los Angeles unpaid wage attorney to obtain more information about pursuing your legal rights. At Kingsley & Kingsley Lawyers, our unpaid wages lawyers have a long and successful track record of helping uphold workers' rights and hold employers accountable. Contact us at (818) 990-8300 for a no-cost consultation and case evaluation.