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California Labor Code Section 351 – Tips and Gratuities Regulations

Anyone who has ever worked as a waiter can testify to the importance of tips. With their generally low wages, waiters depend on tips to make up the difference and make their job worthwhile. Fortunately for employees, California Labor Code Section 351 sets down several regulations concerning tips and gratuities given to service staff by customers. These regulations protect the tips and gratuities received by the staff and help ensure that neither employers nor non-service employees can steal money from tips.

Under California labor law, tips and gratuities given to a waiter or service staff member become the sole and legal property of the employee who received them. As such, employers are very limited in how they can handle tip money. For example, Section 351 explicitly states that, since tips belong to the employee, the establishment cannot deduct a credit card processing fee from any tips given through credit cards. Furthermore, tips and gratuities are considered entirely separate from an employee’s normal wages. That is, the amount of tips that an employee receives cannot be used to pay any part of the employee’s salary, nor are they counted in calculations of overtime pay. As an added bonus, California law stipulates that tips cannot be applied towards minimum wage requirements; tips are considered to be “bonuses” added on top of the minimum wage obligation.

Employers can, under Section 351, set up a mandatory tip pooling system and require employees to take part. There are limitations, however, on who can participate in or be compensated by a tip pool. In general, only employees who provide direct service to customers and patrons are considered eligible to benefit from tip pools, according to the Division of Labor Standards Enforcement. This usually includes but may not be limited to: busboys, maitre d’s, bartenders, and waiters. The law also prohibits managers, owners, or supervisors from benefiting from tip pools, regardless of their role in providing direct service.

For more information about tips and gratuities laws in California, call Los Angeles employment lawyer Perry Smith today at 888-356-2529.