If you are a person employed in a position that allows you to earn tips or gratuity, it’s good to know that California law allows you to keep the tips you earn. Here, we discuss what you need to know about the tips you earn and what to do if you believe your employer has committed wage theft or otherwise violated your right to earned tips and gratuity.

  • What is a tip?
  • What does California law say about tips and gratuities you earn?
  • Do you still have to share tips if it's the company's practice to share tips?
  • Are tips included in overtime calculations?
  • What's the difference between a mandatory service charge and a tip or gratuity?
  • What can you do if your employer violates California tips and gratuity laws?
  • What happens if the employer retaliates against you for complaining or filing a claim or lawsuit?
  • Who should you contact in Los Angeles to discuss tips and gratuity violations?

If you believe your employer has violated your right to your tips or gratuity, contact Sirmabekian Law Firm, PC today. We represent people just like you throughout the Los Angeles metropolitan area.

A tip or gratuity is money a client or customer leaves in addition to the goods sold or services provided. Tips and gratuities are provided on a voluntary basis. Tips are not wages, but they are considered taxable income like regular wages.


There are many industries and employers throughout the Los Angeles area that employs or offers opportunities for tips and gratuities.

Examples include:

  • Sommelier
  • limo driver
  •  ride-share driver
  • waiter/waitress
  • bartender/mixologist
  • valet
  • delivery driver
  • driving instructor
  • golf caddie
  • tattoo artist
  • tour guide
  • doorman
  • concierge
  • Maitre d’
  • gaming dealer
  • exotic dancer
  • massage therapist

Labor Code 351 states that

  • No one, including owners and managers, can withhold or take any amount of tips.
  • Your employer cannot deduct money from your paycheck because of the tips you earned.
  • Your employer cannot count your tips toward its minimum wage obligation.
  • Your employer cannot deduct credit card processing fees from your tip.
  • Your employer must pay you tips made by a credit card by your next regular payday.

Some people assume that because tips are theirs, they do not have to share them. On the contrary, the law, states that gratuities are considered the property of the employees or employee that it was given to.

Courts have interpreted this section to include persons who provide “direct table service” or are in the “chain of service.” So, busboys and hosts, among others, may also be the subject of a customer’s tip, not just the server. Pooling tips, therefore, are lawful and can be required by the employer.

There are three important criteria to tip pooling policies, however:

  1. The tip pooling policy must be fair and reasonable.
  2. The people participating in the pooling policy must be employees.
  3. The tip pooling policy must not be used to compensate owners, managers, or supervisors.

So, for example, if the floor manager of a restaurant requires that all servers provide him or her with 20 percent of their tips, this is unlawful. Even if the floor manager has direct contact with the customer, managers are not allowed to receive any of your tips.

Tips are not included in overtime calculations. Tips are voluntarily left for you and are not provided by the employer, so they are not part of your regular rate of pay.

A mandatory service charge is not a tip or gratuity. A mandatory service charge is a contractually agreed-upon amount a customer or client makes to a business. The customer is automatically billed the mandatory service charge. These charges generally belong to the employer, and the employer can generally decide what to do with them – whether to keep it or distribute it among the employees.

Some local ordinances (e.g., Santa Monica), however, require that the employees who directly provided the services should receive the mandatory service charge. Further, a recent California case, O’Grady v. Merchant Exchange Productions, Inc., No. A148513 makes the argument that some mandatory service charges qualify as gratuities, meaning the payment should go to the employees and not the employer. If you have questions, you should speak to an attorney.

If your employer violates your right to tips and gratuity, you can take action. Your first step is likely to go to the Division of Labor Standards Enforcement to file a wage claim or file a lawsuit against your employer. Both have benefits and drawbacks. Speaking to an attorney first may help you clarify which path is right for you.

To note, too, if your employer used your tips as a credit against your wages, you have effectively been underpaid. You may be able to make a claim for a waiting time penalty, too, depending on the specific circumstances of your case.

Also, if your employer retaliated against you because of your complaint and, thus, fired you, you may also be able to file a discrimination complaint with the Labor Commissioner’s Office or file a lawsuit against the employer.

In the state of California, adverse employment action which results from someone opposing practices prohibited by the Fair Employment Housing Act can be considered retaliation. This includes things like filing complaints, and participating or testifying in a hearing, investigation, or proceeding conducted by government agencies.

Sirmabekian Law Firm, PC is dedicated to helping hard-working Californians get the pay and/or compensation they deserve. Employers have obligations to you, and you have rights. Contact us to schedule a free initial consultation today.

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