Most of the employees in California earn tips. These tips mostly come from satisfied customers. Interestingly some employees get more money in tips than their hourly wages. It becomes complicated when such tips are to be received as a part of compensation. Each state has its own rules on what may count as a tip or what amount you can receive from your employer. If you are to receive tips as part of your compensation, you need to be aware of your legal rights.
What Are Tips And Gratuities?
Tips and gratuities is money left for an employee by a satisfied customer over and above the actual amount of a service or a good. Tips can either be paid as cash or through a credit card. Besides, an employer may also impose a mandatory service charge. Typically, for any amount to be considered as a tip or a gratuity, it should be:
- Given voluntarily by the customer.
- The amount is not subject to negotiation either by the employee or the employer.
- The customer is not restricted to who receives the tip or gratuity or the amount to be given.
If you believe your employer to have tips left over by the customer and you never received them, you can choose to consult an employment law attorney in California. An employer is not supposed to collect any amount of gratuity that’s left to the employees. Most employers tend to count the tips towards and pay employees less than minimum wage simply because an employee has earned tips.
Even if an employee receives tips, he/she should receive the minimum wage for every hour worked. Unfortunately, most employees are taken advantage of by their employers. In summary, an employee has the below rights under the California tip law:
- The tips or gratuities belong to the employee alone.
- The tips or gratuities should not be shared with the employers or managers
- The employer should not credit the amount received as tips against employees’ wages, nor should they be counted as overtime.
California Law is very lenient to employees. Thus, any employer who tries to violate these laws may have legal action taken against them.
When Should Tips Be Paid?
Any payment for tips or gratuities must be made available to workers immediately when they are received. As easy as it may seem, a tip may become complicated when the employer imposes a mandatory service charge or pays the employee by credit card. A worker has no legal right to any money obtained through a service charge. However, some employers give their workers at least some part of the charges. If the customers use credit cards, the payment should be paid on the next regular payday after the credit card’s authorization. One of the main questions that arise is whether an employer should deduct the credit card processing fee when paying the employees’ tips. Under California law for tipped employees, an employer is supposed to pay for the processing fee’s full cost and hence give the employee a full tip left by a customer. It’s worth noting that tips and gratuities received from mandatory service charges can be considered as taxable income, just like regular wages.
Tip pooling Is legal.
In California, the employer may allow a group of employees to gather some or all tips earned and then divide them into an agreed percentage. However, for this to happen, specific criteria must be followed to ensure a valid tip pool. The rule is that:
- The pool must be composed of certain employees only. That is, employees in chain or service. For instance, bartenders or servers are considered together in a chain of service, while cashiers or cooks may be in another chain of service.
- The share from the tip pool must be distributed fairly and in a reasonable manner. Meaning, the share must be equal to the service each employee provided to the customer. For instance, the server should not receive the same tip as the bartender.
- The tip pooling is only for employees; the managers or supervisors should not have a share from the pool.
Your employer must keep all the records related to tips and gratuities and divide them into employees accurately. If your supervisor, manager, or business owner is forcing you to share your tips, you need to take action. Any employer found guilty of violating the California law of tips and gratuity may be charged with a misdemeanor or be imprisoned. While an employee may not file a lawsuit directly to recover money from their employer, there is another way to ensure they get back their compensation. Some of the options may include filing a conversion lawsuit or a Labor Commissioner complaint. If you have any questions about California’s tips and gratuities, it would be better to speak to an experienced employment lawyer. Such a lawyer can help reclaim your compensation.