Orange County Employment Lawyers Blog
Much debate in recent years has centered on whether American workers in certain industries should be compelled to continue their reliance on tipped wages. There are roughly 5.5 million such workers, and their non-tipped wages often fall far below both the federal and state minimum wages. They may also be subject to tip pools. 
As noted by the California Labor Commissioner’s Office, a “tip” is money left by a customer over the actual amount due for the services or goods they received. That money belongs to the worker(s) – not the employer.
Workers who rely on tipped wages are often (understandably) very protective of them. Tipping pools, which compel workers to share those tips with fellow employees, are not favored among tipped workers.
In California, tip pooling is legal as long as it is done in compliance with state and federal laws. However, there are specific rules and regulations regarding tip pooling that employers must follow in order to avoid violating workers’ rights.
Under California law, employers are allowed to require employees to participate in a tip pool, where tips are collected and distributed among employees who provide direct table service to customers. However, employers are not allowed to take any portion of the tips for themselves or use them for any purpose other than distributing them to eligible employees.
Per California Labor Code Section 351, companies can’t share or keep any portion of gratuities left by patrons. They also cannot make wage deductions from these tips or use them as some type of direct or indirect credit against the worker’s wages. If the tips are added onto their bill with the use of a credit card, that money must be paid – in full – to the worker no later than the next regular payday. The employer can’t tax that money or deduct credit card processing fees from employee tips.
Although each tip is to be the sole property of the employee(s) to whom it was given or “left for,” courts have interpreted this portion of the law to allow for involuntary tip pooling – but only so long as it’s not used to compensate the owner, managers, supervisors, or business – even if those individuals also provide direct table service or are somewhere in the chain of service.
Further, the tip policy must be “fair and reasonable.” Of course, as our Los Angeles wage and hour lawyers recognize, this is a broad definition open to wide interpretation. Generally, California courts have held that employers can require tip sharing with other staffers so long as the individuals with whom you are compelled to share are among those who provided direct table service and/or are in the chain of service. That could include bartenders, bussers, and hostesses, and kitchen staff – but only if the employer isn’t given tip credit. The “tip credit” is what allows employers to pay some workers less than the minimum wage.
For example, the federal Fair Labor Standards Act requires a minimum cash wage to tipped workers of at least $2.13 hourly, so long as their combined cash and tip wages even out to $7.25 hourly. However, some states, including California, have more stringent minimum wage requirements. California has no maximum tip credit against minimum wage, and requires all workers to be paid a minimum cash wage of $15.50 hourly. In these situations, where all workers are already paid the minimum wage by the employer, tipping pools can be required, the proceeds shared with all other non-supervisory workers.
If there is a tip pooling arrangement, employers are required to inform their employees about the existence and terms of it, and they must maintain accurate records of all tips received and distributed. Employers who fail to comply with these rules may be subject to penalties and legal action.
Overall, it is important for California workers to be aware of their rights and to speak out if they believe their employer is violating these laws. The California Department of Industrial Relations provides resources and assistance to workers who have questions or concerns about their workplace rights.
Contact the employment attorneys at Nassiri Law Group, practicing in Newport Beach, Riverside and Los Angeles. Call 714-937-2020.
Additional Resources:
Tips and gratuities, California Department of Industrial Relations
More Blog Entries:
Filing Deadlines for California Wage Theft, Rest Break Violations, and Employee Misclassification, Jan. 12, 2023, Los Angeles Wage and Hour Lawyer Blog