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Understanding California tip laws is critical for employees throughout California. Do you have questions about your right to keep tips or what counts as gratuity under California law? Consider these key facts and how they may govern your right to keep tips.


California law defines a “tip” as money that is intended for an employee, whether it is paid directly to the employee, given to that employee, or left for the employee—such a tip left on a table at the end of the meal—by a customer that was not part of the customer’s financial obligation to the establishment. A tip does not include any funds paid to the establishment for goods, services, or food and drink, but does include the amount left over after that obligation is met.

Many California businesses do include mandatory “service charges” attached to the bill. These are not considered tips under California law.


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As a tipped employee in California, you have several key rights with which you should be very familiar to ensure that you are being paid correctly.


In California, your employer cannot credit your tips toward its minimum wage obligations to you. Many other states have laws that allow businesses to count tipped wages as part of an employee’s “minimum wage.” According to those laws, employers can pay their employees less than minimum wage as long as the employee makes up the difference in tips. This strategy is known as a “tip credit.” California,  however, does not allow employers to take tip credits, which means that any tip you make is in addition to your minimum wage earnings.


When a business utilizes tip pooling, it combines all tips into a common fund and divides those tips according to a predetermined strategy. While tips may be split among members of the staff on the same level, tip pools in California cannot be shared with managers who have the authority to hire and fire employees unless the manager performs the same work functions as the employees who are part of the tip pool. For example, a manager who serves tables in a restaurant like the servers might participate in a tip pool, but a manager who simply oversees the restaurant would not be eligible for that tip pool under California law.


According to California law, tips belong to the employee, not to the employer. That means employers cannot take any portion of that tip for themselves for any reason, including deducting from the employee’s wages for that tip.

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An employer who violates California tip laws is guilty of a misdemeanor in California. An employer may face jail time of up to 60 days and/or a fine of up to $1,000 for violating tip laws. If you believe that you have experienced a violation of tip law in California, you may have the right to file a complaint with the California Labor Commissioner’s Office. In some cases, you can also sue your employer, including a lawsuit for unpaid wages, including interest and penalties for failure to pay wages. If you have suffered a violation of tip law in California, you should act as soon as possible to protect your legal rights.


If you have faced a tip law violation in California, working with an employee rights lawyer can offer several key benefits. An employee rights lawyer can:

  • Help you understand your rights, including how to protect those rights as you take your next step
  • Help protect your future tips and wages, ensuring that you will get to keep the wages to which you are entitled
  • Help you avoid potential retribution from your employer (which is also illegal under California law) if you have to take legal action against them

Contact an employee rights lawyer today to learn more about your rights.

Frequently (un)asked questions

Under California law, employers can create “tip pools” that include all the tips received throughout the evening. Workers who do not necessarily provide table service, like hosts and bartenders, may participate in the tip pool; in essence, servers are “tipping out” those individuals. Only managers who have the authority to hire or fire are excluded from tip pools under California law.

Employers in California must provide employees with the full amount of their tips without deducting credit card processing fees or other costs associated with those fees from the tip. An employer that tries to pass those fees on to the employee is in breach of California tip laws. California Labor Code § 351 specifically states that a gratuity is the full property of the employee who receives it and that the business cannot take any portion of that tip.

Under California law, restaurants must pay the same minimum wage as any other business. While in other states, restaurants and other businesses that allow tips for employees can get away with paying less than minimum wage if the employee earns enough tips to make up the difference, California employers must pay servers and other tipped employees the same minimum wage that they would pay any other employee. Tips are considered an addition to the employee’s earnings rather than a vital part of the employee’s overall income.

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Top-Rated Employee Rights Lawyer

After experiencing a violation of your rights as a tipped employee in California, it’s difficult to know where to turn, to know who you can trust. At the Malk Law Firm, we have successfully represented employees against large and small companies (all over California and Washington) in various labor and employment-related lawsuits.

Trust our team to fight for your rights in the workplace. Our employee rights lawyer is available for a consultation to discuss your options. Please reach out today to tell us about your case.

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