What Are My Rights as an Employee to My Tips?

Thomas M. Lee

Tips Belong to the Employees Who Received Them


A California Employer shall collect, take, or receive any gratuity or a part thereof, that is paid, given to or left for an Employee by a customer. The law prohibits Employers and every person other than the employer who has the authority to hire or fire any employee or supervise, direct, or control the acts of employees from sharing in or keeping any portion of a gratuity left for or given to one or more Employees by a customer. In other words, the owner of a business and its managers and supervisors may not take part of any tip pool arrangement. In addition, an Employer may not deduct use tips as a credit towards payment of wages earned by an Employee.

Credit Card Tips Must Be Paid in Full With No Deductions for Bank Fees

Under California law, every gratuity and tip are the sole property of the Employee or Employees to whom it was paid, given, or left for. The tips paid by customers using credit cards must be paid to the Employees in the full amount of the gratuity that the customer indicated on the credit card slip. No deductions for any credit card payment processing fees or costs may be deducted from the tip. Payment of gratuities and tips made by customers using credit cards shall be made to the employees not later than the next regular payday following the date the customer authorized the credit card payment.

What if My Employer Charges a Service Charge?

The California Division of Labor Standards Enforcement states that a Service Charge which was added to a customer’s bill for the service is not a gratuity and may be received and disbursed by the employer without limit.

On the other hand, if the Service Charge or Added Gratuity is waivable or negotiable, or couched in terms of being less than a fixed amount which must be paid, the charge is not an added “charge” to the bill and payment is gratuitous. This means, the Service Charge would be considered as a tip and treated like a tip. Some cities have local ordinances that contain provisions that require the entire service charge be paid to the employee who provided the service when the customer is required to pay a service charge. The reasoning is that customers, believing the charge will go to the employee providing the service does not also leave a gratuity. (See Garcia v. Four Points Sheraton LAX (2010) 188 Cal.App.4th 364.) Service charge claims based on local ordinances may be enforced through the Labor Commissioner’s claims process or through the Bureau of Field Enforcement. Some California Courts have held that mandatory service charges added to food and beverages could constitute a gratuity.

What Can I Do if My Employer Is Stealing My Tips?

Los Angeles Employment Attorney Thomas M. Lee has helped many clients over the past 22 years of his practice recover their stolen tips through lawsuit for conversion of gratuities. Generally, a lawsuit for conversion of gratuities must be filed within 4 years. Call Thomas M. Lee at 213-251-5533 for a free legal consultation today.

Please note that the information provided on this website is for general information purposes only and is not to be construed nor relied upon as legal advice nor the formation of an attorney-client relationship. For a free consultation with Attorney Thomas M. Lee, please contact us.

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