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What are the rules regarding tip-pooling in California?

It seems, as long as there have been waiters, waitresses and other service industry workers, there has been tip-pooling. For the protection of these service industry employees, California legislature passed a law in 1929, prohibiting employers from taking any portion of their employees’ tips. However, the law did permit employers to credit tips against employees’ wages, i.e., use tips in place of wages.  The legislature eventually passed a law, in 1975, that prohibited the practice of “tip credits”.

California Labor Code § 351 now reads:

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.

Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.

An employer that permits patrons to pay tips via credit card shall pay the employees the full amount of the gratuity that the patron indicated on the credit card slip, without any deductions for any credit card payment processing fees or costs that may be charged to the employer by the credit card company. Payment of tips made by patrons using credit cards shall be made to the employees not later than the next regular payday following the date the patron authorized the credit card payment.

Many industries, particularly the restaurant industry, have a “house” practice of mandatory tip-pooling, in which the employer takes employees’ tips, pools them, then allocates the money to its employees as it sees fit.  The courts have conclude that “tip-pooling”  is permissible, so long as the distribution is “fair and reasonable”.

. . . but no

Your employer can NOT take any part of your tips for itself.  Even if your employer sets up a mandatory tip pool, your employer and its “agents” (managers and supervisors) are prohibited from taking any of the money from that pool.

What employees are eligible to participate in the tip pool?

In March 2009, a court held that employees who did not engage in direct table service could still participate in the tip pool, so long as they were in the broader “chain of service”. Etheridge (Brad) v. Reins International California, Inc. (2009) 172 Cal. App. 4th 908.  Another court held that bartenders could participate in tip pools, even if they never directly brought drinks to the customer’s table (although there the court stuck with the old model and ruled that this was “direct table service”). Budrow (Aaron) v. Dave & Buster’s of California, Inc. (2009) 171 Cal. App. 4th 875.

If you have a dispute with your employer regarding wages or tips, please call California Employment Attorney, Todd M. Friedman at 877-449-8898 for a free consultation.