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California Tip Laws – What Service Workers Need to Know

January 27, 2025 Legal Team

A tip, also known as a gratuity, is a voluntary payment given by a customer to an employee for services rendered. Tips belong to the employee, not the employer. California labor laws strictly regulate how tips are handled to prevent misuse or unfair practices.

If your right to how you receive tips is violated, please contact our Orange County wage and hour attorneys to discuss your legal options today.

Key California Tip Laws

California Labor Code Section 351

This is the primary law governing tips in California. It establishes the following key protections:

  • Tips are the sole property of the employee who earns them.
  • Employers cannot take any portion of an employee’s tips or deduct them from wages.
  • Tip pooling is allowed, but only among employees who provide direct or supporting customer service. Managers, supervisors, and owners cannot participate.
  • Employers cannot count tips toward minimum wage obligations (prohibiting “tip credits”).

California Labor Code Section 353

Section 353 ensures transparency regarding tip distribution. Employers who collect tips as part of a group pooling system must clearly disclose how tips are distributed among employees.

California Labor Code Section 450

This law prohibits employers from forcing employees to share tips with the employer or requiring employees to give up their tips as a condition of employment.

Credit Card Processing Fees

Employers also cannot deduct credit card processing fees from tips paid to employees. For example, if a customer tips $10 on a credit card, the employee must receive the full $10, even if the credit card company charges a processing fee.

Service Charges

Service charges, such as those added automatically to large party bills or catered events, are not considered tips under California law. Employers can decide how to distribute these charges, and they are not required to give them to employees unless specified by company policy or contract.

California Tip Laws – What Service Workers Need to Know

What to Do if Your Tip Rights Are Violated

If you believe your employer has violated California’s tip laws, take the following steps:

  • Document the Issue: Keep detailed records of your tips, hours worked, and any deductions or tip-sharing arrangements.
  • Report the Problem: Notify your employer or HR department in writing about the violation. Sometimes, this can resolve the issue without further action.
  • File a Complaint: If your employer does not address the issue, you can file a complaint with the California Labor Commissioner’s Office.
  • Consult an Attorney: An employment lawyer can help you understand your rights, build a case, and recover unpaid tips or wages.

Legal Remedies for Tip Law Violations

Employees who experience tip law violations in California have several legal remedies to recover lost earnings and hold employers accountable. Under California Labor Code Section 351, employees can recover the following: 

  • Unpaid Tips: Any wrongfully withheld tips in full.
  • Back Wages: If minimum wage violations occurred. 
  • Interest: Interest on unpaid tips. 
  • Attorney’s Fees: The employer may be required to pay for the employee’s attorney’s fees and court costs. 

Employers may also face civil penalties and be required to pay waiting time penalties for failing to pay owed tips at termination. If you suspect your employer is violating California tip laws, speak to an experienced Orange County wage and hour attorney. With the right support, you can recover what you are owed and help ensure you are treated fairly in the workplace. Contact us today.