Tip Pooling and Distribution In California

Many people in the service industry rely on tips for the bulk of their pay, including in California. Tips—sometimes called gratuities—are payments made to a service worker or left to them in an amount beyond the patron’s required bill payment. Tipped workers in California typically only earn minimum wage in their direct payment from their employers and depend on their tips to make ends meet.

While some California employers allow service workers to keep the tips paid directly to them, others use a tip-pooling and distribution system to allow all service employees to share their tips fairly. Under a tip pooling system in California, employers must abide by specific labor codes that protect employee’s rights. Call our Orange County unpaid wages lawyers to discuss your case today.

How Does Tip Pooling In California Work?

Many employers in California and other states use tip pooling and distribution as a means of ensuring all workers receive their fair share of tips earned during their shift since tipping amounts partly depend on the varying financial abilities of customers. Some service workers may serve customers with a greater ability to pay than those served by other workers.

Tip pooling builds a sense of teamwork. It also allows workers who work behind the scenes rather than directly with customers to receive a share of the tips. Many employers believe that tip pooling systems increase productivity and eliminate adversarial competition between employees.

What California Laws Regulate Tip Pooling and Distribution? 

An employer has a duty to distribute all funds in the tip pool fairly with a pre-set formula that’s clearly outlined for applicants during the hiring practice. During the tip pooling and distribution process, employees may take home their fair share of cash tips at the end of their shift. Employers must add their share of tips left through electronic payment systems to the employee’s next paycheck. An Orange County employment lawyer can take a look at your case if you believe your employer has been unfairly holding back your wages.

Under California ARTICLE 1. Gratuities [350 – 356] the labor law states the following:

“No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer.”

Employer Regulations for Tip Pooling and Distribution

Employers or business managers may not withhold an employee’s fair share of the tip pool. A manager may only partake of a share of the tip pool if they have the same daily duties or tasks as the servers. Additionally, the following employer restrictions apply to tip pooling and distribution in California:

• Employers may not deduct a worker’s share of tips from their hourly wages (tip crediting)
• Employers cannot use the employee’s tips toward their minimum hourly wage rather than in addition to their hourly wages
• Employers may not deduct credit and debit card processing fees from the employee’s share of tips
• An employer doesn’t have to include tips as part of an employee’s regular pay rate when calculating overtime pay

In addition to these employee protections, under the California labor code, employers may not retaliate against employees who file complaints against them for violating the labor codes regulating tip pooling and distribution. Contact our unpaid wages attorneys at Sessions & Kimball for a free case review today.