< Library - Employment Law          
Wage Claims, Overtime & Other Employee Compensation

ARE EMPLOYEES REQUIRED TO SHARE THEIR TIPS?

A:   No. Tips or gratuities are monies voluntarily given to or left for an employee by a customer, guest or patron of a business for an amount over and above the costs of goods sold or services rendered. Tips properly belong to the employee and not the employer. 

   However, Labor Code Section 351 allows involuntary tip pooling. For instance, an employer in a restaurant can require employees to pool in their tips in order to share these with other staff that provide service.  If a tip pooling is in effect, the tips are to be distributed among employees who provide “direct table service” such as servers, busboys, bartenders, hosts/hostesses and maitre d’s. This may also apply to other businesses like parking facilities, where the parking attendants can share the tips with the cashiers. However, supervisors, managers and business owners are not allowed to share in the tip pool. 

   In March of this year, Superior Court Judge Patricia Cowett ordered Starbucks to pay nearly $106 million in restitution to an estimated 120,000 current and former baristas in California because the coffee company allowed supervisors to share in tip pools over the past eight years.   Starbucks argued that their shift supervisors basically do the same tasks as the baristas who share in the tip pool and, therefore, should be allowed to share in the tips left in the money jars.  The court, however, ruled that under state labor law, the supervisors are essentially “agents” of the company and, thus, the company's policy of allowing them to share in tips violated that law.

   Under the law, the employer can neither share in the tip pool nor credit the tips against the employee’s wages. In California, an employer has an obligation to pay the minimum wage plus any tips left for them by patrons of the employer’s business. It is illegal for employers to make deductions from tips or gratuities.

   An employer who permits patrons to pay gratuities by credit card must pay the employees the full amount of the gratuity the patron indicated on the credit card slip. The employer cannot deduct the gratuity amount for credit card payment processing fees or costs that may be charged to the employer by the credit card company.   

   Tips and gratuities, however, are different from the mandatory service charge.  The latter is the amount that a guest is required to pay based on a specified service amount listed on the menu.  For example, the restaurant can charge additional 10 or 15 percent for the banquet.  These charges are not gratuities or tips voluntarily given by customers to the employees but are owed by customers to the establishment itself. 

   he employer has the option to distribute all or part of a service charge to its employees in the nature of a bonus.  This bonus shall also be included in the regular rate of pay when calculating overtime payments. 

© Law Offices C. Joe Sayas, Jr.