Federal and California Tip Law

Does your employer comply with Federal and California tip law?

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

Both Federal and California tip law state that tips are the sole property of the tipped employee. 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. Federal law prohibits employees who have not customarily participated in tip-pooling arrangements such as "dishwashers, cooks, chefs, and janitors" from partaking in tip pools.

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. Federal law allows employers to deduct the percentage paid to the credit card company from the employees tip, but this deduction cannot reduce the employee's wage below the federal minimum wage. Under Federal and California tip law, 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. In California, if an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the minimum hourly wage of $7.25, the employer must make up the difference.

What can I do of I believe my employer violates Federal or California tip law?

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 at (866) 981-4800 for a free consultation with our employment lawyers.

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.

Eric Gibbs

Dylan Hughes

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Girard Gibbs is a national litigation firm representing consumers, investors, employees, and small businesses in cases involving consumer protection, personal injury, securities, antitrust, and employment laws. The firm’s senior partners, Daniel Girard and Eric Gibbs, have been selected for inclusion in The Best Lawyers in America® 2012 and Northern California Super Lawyers, and have earned AV-Preeminent ratings from Martindale-Hubbell, recognizing them in the highest class of attorneys for professional ethics and legal skills.