Both The Fair Labor Standards Act (FLSA) and The California Labor Code include provisions regarding workers who receive tips as a significant portion of their wages, such as waiters, waitresses and bartenders.

California Labor Code Section 351 states that a tip is “the sole property of the employee or employees to whom it was paid, given, or left for”. In other words, employers and supervisors are prohibited from taking any portion of their employees’ tips. An exception to this provision is the practice of “tip-pooling” in which tipped employees combine and share their tips. Both California and federal law permit tip pooling, but restrict the types of employees that can participate in the pool. California law allows only employees that provide “direct table service”, such as waiters/waitresses, busboys, and hosts/hostesses to participate in the tip pooling arrangement, with the exclusion of owners, supervisors, and managers.

Credit Card Tips

The California Labor Code states that if a tip is left by credit card, the employer must give his employee the full amount indicated on the credit card slip and may not deduct any amount for a credit card processing fee. Employees must receive their payments for credit card tips by the next regular payday following the date the tip was given.

Tip Credits

Under California law, employers may not deduct their employees’ tips from their wages, nor can they credit tips towards future wages. This differs from the FLSA tip credit provision, which permits employers to apply tip earnings toward the balance of the minimum wage obligation. Under the FLSA, employers must still pay their employees a minimum of $2.13 an hour and notify them if they are employing a tip credit arrangement.

Starbucks Tip-Pooling Settlement

A San Diego Superior Court judge ruled recently in the case Chou v. Starbucks Corporation that Starbucks violated state law by allowing shift supervisors to share in the tip pool, awarding a settlement of $106 million to current and former California Starbucks baristas. The lawsuit cited California Labor Code 351, which states that “agents”, or those in a supervisory position, cannot take tips from a tipped employee.

Girard Gibbs LLP is a law firm based in San Francisco, California. Our employment lawyers are highly knowledgeable about employee rights under federal and California employment law, and actively pursue claims on behalf of employees whose rights have been violated. If you believe that you have not been fully compensated for tips that you have received, or that your employee rights have otherwise been violated, please fill out the form below or call us toll free at (866) 981-4800 for a consultation without charge.

Important Note: This summary is intended to provide a basic overview of the typical types of employment cases handled by our firm. It is for informational purposes only and does not constitute legal advice.