What Counts as Tips for Wage Law Purposes?

Posted on Tuesday October 22, 2019

There are different provisions and requirements under California and federal labor laws for employees who receive tips than for non-tipped employees. Tipped employees can include front-of-the-house restaurant and bar workers, those in the hospitality industry, and more. Before you examine the details of wage laws for tipped employees, it is important to first understand what counts as a tip in the first place. 

While you may think that identifying tips is a relatively straightforward prospect, it can be more complicated than you might believe in the eyes of the law. 

Voluntary Cash Payments

Many people receive voluntary cash payments from customers in addition to what the customer was initially charged. This is the standard idea of a “tip” in our society. If the choice is left completely to the customer, any amount the customer decides to pay above the initial bill should be counted as a tip. Employees who regularly receive such payments in the course of their work are generally counted as tipped employees, and their employers do not have the right to take the tip payments.

Service Charges

Some establishments add a “mandatory service charge” to their customer bills, especially when it comes to larger parties or private events. The law does not consider this charge to be a tip, even though the customer might. Customers often assume this service charge is a predetermined tip for employees, so they might not leave any additional payment. Still, this is a service charge that employer can keep, and not automatically a tip for the employees. If the employer gives employees part or all of the service charge, it is on a voluntary basis. 

Credit Card Payments

In this day and age, many people pay by credit card and add a tip to the credit card payment on the gratuity line. If this happens, some states let employers subtract the processing fee for the credit card from the tip. However, California is not one of these states. In California, if you receive a tip by credit card, your employer must hand over the full amount, and the employer is fully responsible for the processing fee. 

While what is or what is not a tip can be confusing, the following are the basic requirements for a tip:

1. It must be voluntarily paid by the customer
2. The customer has complete control over how much or how little to pay for the tip
3. The customer decides who will receive the additional payment
4. There can be no amount or requirement for added payment set by the employer

Learn How a California Employment Law Attorney Can Help in Your Situation

Many tipped employees in California have questions or concerns about the practices of their employers when it comes to minimum wage, tips, tip pooling, and more. If you believe that your employer is denying you the tips or minimum hourly wage you rightfully deserve under the law, contact our employment lawyers at the Mara Law Firm right away. Please call (619) 234-2833 or contact us online for help today.