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Can Managers Receive Tips in California?

Posted by Eric Kingsley | Aug 06, 2023 | 0 Comments

Tipping is an accepted part of doing business, particularly in the service industry, in California. Whether it's a restaurant, nail salon or rideshare service, a number of workers in California count heavily on tips to make up for the lack of a living wage in a state where cost of living is exceptionally high. The laws surrounding tipping can sometimes get complicated. One of the most important questions our California employment lawyers get on this subject is whether employers and/or managers can take any portion of employees' tips.

What Does the Law Say about Managers and Tips?

California's labor laws are clear on this issue. California Labor Code Section 351 states: "No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer."

In other words, tips are considered to be the sole property of the employee or employees to who they are paid in recognition of the services and the quality of services they have rendered. If an employer such as a restaurant allows patrons to pay tips by credit card, the law requires the employer to pay the employee the full amount of the tip that the patron indicated on the credit card slip without taking any deductions for credit card payment processing fees or other charges the credit card company may charge the employer. Payment of tips made using credit cards must be made to employees no later than the next regular payday after the credit card payment was authorized.

Can Your Employer Take Your Tips?

Many workplaces, specifically restaurants, have a practice known as "tip-pooling" where the employer takes employees' tips and pools them together. They then allocate the money to employees as they see fit. While a reading of Section 351 of the California Labor Code may appear to prohibit such a practice, California courts have concluded that tip-pooling is permissible as long as it is done in a "fair and reasonable" manner.

However, it is important to remember that your employer or manager cannot take any part of your tips for themselves. Even if your employer has set up a tip pool in your place of work, managers or supervisors are prohibited from getting any of the money from the tip pool. Section 351 makes this crystal clear.

Different Interpretations About Distribution of Tips

Courts have however differed over the years when it comes to the interpretation of who is eligible to participate in the tip pool. In a restaurant setting, this may raise the question of who else can benefit from the tip pool and whether employees such as bus boys, chefs, janitors or dishwashers can participate. Courts in the past have held that employees who are in the "broader chain of service" can get tips even if they are not directly involved in rendering the service to patrons such as a waiter. As an example, another court decision stated that bartenders are eligible to participate in tip pools even if they don't directly bring drinks to the patrons' tables.

However, in a more recent case in 2016, an appellate court ruled that tips should not be shared with cooks and dishwashers because customers do not typically tip them. Moreover, federal labor laws make it clear that while managers and supervisors are prohibited from retaining tips earned by other employees, they are allowed to keep tips that they received directly from customers based on the service the manager or supervisor "directly and solely" provided.

So, the question of which employers can participate in a tip pool is often answered depending on each scenario - on a case-by-case basis. The important element here that courts look at is the intent of the customer who is tipping. An experienced Los Angeles wage and hour attorney will be able to help determine whether your employer, manager or supervisor violated any tipping laws.

It is also important to note that California prohibits employers from counting employees' tips toward their obligation to pay minimum wage unlike other states that allow employers to pay their workers below the minimum wage if their combined tips and hourly wages equal or exceed the minimum wage rate.

Getting the Help You Need

If your employer, manager or supervisor wrongfully and unlawfully takes tips you earned, you may be able to file a lawsuit against your employer to recover those lost tips or wages. In California, when an employer or another supervisor or manager takes an employee's tips, it is considered a wage and hour violation. The experienced Los Angeles wage and hour attorneys at Kingsley and Kingsley Lawyers have helped workers and their families seek justice and compensation for unpaid wages in California. 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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