Employee Wage Rights


Can an Employer Deduct Credit Card Fees from Tips?

Posted by Eric Kingsley | Sep 04, 2023 | 0 Comments

For restaurant workers and many others who work in the service industry, tips form a large part of their take-home pay. Whether you are a restaurant worker or are employed in a hotel or beauty salon, you weekly pay could depend largely on whether or not you keep customers and patrons happy. Regardless of how your customers choose to pay your tip - cash, credit card or some other method -- California tip law states that you should receive the full tip.

If you work in California and your employer withholds or deducts money from tips that were paid using a credit card, that would a violation of the law. If you are experiencing this form of wage theft, it is important that you come forward and contact an experienced Los Angeles wage and hour attorney who can help uphold your rights.

Why Businesses Take Issue with Tips by Credit Card

Owners of restaurants, bars and other restaurants often have an issue with payments by credit card because credit card processing fees eat into their profits. Some owners illegally attempt to pass these costs on to their employees by withholding money from tips that were paid by credit card. California labor laws prohibit this practice.

Even in states where it is legal to engage in this practice employers are prohibited from deducting the cost of processing the gratuity portion of the bill of their employees' tips and are also prohibited from deducting the cost of processing the entire bill from workers' tips. While the Fair Labor Standards Act allows employers to deduct the processing percentage from the tip, California law bars even that practice.

What Alternatives Do Business Owners Have?

While businesses, particularly small businesses such as restaurants, may be under a lot of pressure to keep themselves profitable, it should not be an excuse to exploit their own employees. If your employer is using the health of the business as an argument to withhold tips and offset their credit card processing costs, do not be intimidated by such excuses.

If your employer maintains that the credit card processing company's processing fees are too high and they need to deduct money from your tips, you could try pointing out that they may be overpaying for credit card processing fees. It is your employer's responsibility to shop around for a more cost-effective provider. If your employer says they cannot find someone, that is suspicious. Your employer might be reluctant to switch companies because they are getting some other financial advantage. However, that should not come at the expense of your hard-earned tips.

What Actions Can You Take?

If you have tried talking and reasoning with your employer and that doesn't go anywhere, you may wish to point out California's tip laws and inform them that they are in violation of those laws. Some employers may not be aware of the state's tip laws. They may believe that they have a right to withhold your tips to offset credit card processing fees. If you have pointed out what the law states and your employer is still doubling down on the practice, it is time to look for other legal options and contact an experienced Los Angeles unpaid wage attorney.

How Can an Employment Lawyer Help?

The very thought of fighting your employer on this issue can be extremely intimidating. However, if your employer is taking your tips illegally, it is important to remember that California law is on your side. The state's labor laws also prohibit employers from retaliating against employees for bringing up tip violations or for filing complaints over tip law violations.

It would be in your interest not to try and negotiate with your employer on your own. Do not attempt to settle with them without an experienced lawyer on your side. Once your employer has shown reluctance to engage with you, it is best to let your attorney handle the matter including all types of communications and negotiations.

At Kingsley & Kingsley Lawyers, we have helped workers who have not been paid due wages stand up against their employer and seek justice and compensation for their losses. We will help you file an employment lawsuit or a class action, depending on the facts and circumstances of the case. In some cases, you may also be able to sue your employer for retaliation.

We will help analyze all aspects of your case and provide you with the guidance you need during this difficult time. Our employment firm works on a contingency fee basis, which means you will not pay us any fees unless we win compensation for you. If your employer is violating California tip laws, call us at (818) 990-8300 to find out how we can help you.

About the Author

Eric Kingsley

Eric B. Kingsley is a 2023 "Best In Law" Award winner and has litigated over 150 class actions. He is also an AV peer rated attorney and a prolific speaker at various seminars on employment law.


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