Selecting The Right Attorney Is Important

What are California’s rules on tips and gratuities?

On Behalf of | Apr 23, 2023 | Wage and Hour Violations

Say what you will about “tip culture” going overboard, there’s no question that tips and gratuities make up a significant portion of income for people in the service industries.

All too frequently, underhanded employers try to get a cut of that money – even though they aren’t due it. If you receive tips from your customers or clients, knowing your rights can help you navigate some tricky situations with more confidence.

Key things to know

Given that it is usually best not to take your employer’s word for how tips and gratuities work in this state, here are some basics you should know:

  • Tips are the property of the employee. This means that your employer cannot take a portion of your tips or require you to share them with other employees (unless you have agreed to a valid tip-pooling arrangement).
  • Tip pooling is allowed under certain conditions. This is allowed in California as long as the pooling arrangement is voluntary, and the employer does not take any portion of the tips. Additionally, the employees who participate in the pool must all provide direct table service to customers.
  • Credit card fees cannot be deducted from tips. Processing fees for credit card payments are a sore point for many establishments, but the employer cannot deduct this fee from the tip portion of the payment. This means that if a customer leaves a $10 tip on a $100 credit card charge, the employer cannot deduct any portion of that $10 tip to cover credit card fees.
  • Service charges are not the same as tips. Some businesses, particularly restaurants, may add a mandatory service charge to a bill in lieu of tips – especially for large parties. However, service charges are not considered tips under California law, and they belong to the employer, not the employee. If your employer adds a service charge to customer bills, they must clearly state on the customer’s bill that this charge is not a tip, and they must distribute the funds to employees as wages.


Challenging your employer over your right to tips (and all that entails), isn’t comfortable or easy – but the law is on your side. You can contact the California Labor Commissioner’s Office for more information or seek experienced legal guidance to assert your rights. This course of action may be particularly important to consider if this has been a long-term issue with your employer or if you experience any form of retaliation for speaking up.