Tip Credits and Tip Pooling

Los Angeles Attorneys Assisting Employees With Wage and Hour Claims

Many employees in food service and hospitality are tipped in Southern California. Wage and hour law with regard to wait staff and other tipped employees can be complicated. There are limits as to who can participate in a tip pool, and how much can be contributed to it. If you are concerned that your employer has violated rules related to tip credits and tip pooling, you should consult an experienced employment attorney. At the Nourmand Law Firm, our Los Angeles wage and hour lawyers may be able to counsel and represent you in a claim.

Tip Credits and Tip Pooling

Tipped workers' rights are complicated under wage and hour laws. Federal law provides rules for tip credits and tip pools. However, employers are supposed to follow the wage and hour law that is most generous toward employees. In most cases, California law protects employees more than federal law does, and this is true in the context of tips as well.

In California, your tips belong to you, rather than your employer. Your employer is not supposed to seize any part of a tip left for employees for itself. The owner of the restaurant where you work, for example, is not allowed to simply take your tips as income for the restaurant. Under the Fair Labor Standards Act (FLSA), employers in other states have been allowed to take a tip credit toward their obligation to pay minimum wage to tipped employees. However, California law does not allow tip credits at all.

Under California Labor Code section 351, employers are prohibited from keeping or sharing in any part of a gratuity that was left by a patron for one or more employees. It is illegal for your employer to deduct it from your wages or use the gratuity as a direct or indirect credit against your wages. Gratuities under the Labor Code are tips, gratuity, or money paid or left for you by a patron that is over and above the actual amount owed for food, drinks, goods, articles sold, or services rendered. Employers are required to pay you at least the California minimum wage for each hour that you work, on top of any tip that you may get.

California law does permit employers to require tip pooling. Tip pooling occurs when an employer gathers the tips earned by multiple employees and then splits them among the employees in percentages on which they have previously agreed. Generally, tip pooling arrangements should involve a distribution that is impartial and reasonable.

In California, employers are allowed to mandate tip pooling as long as they meet certain conditions. First, the people participating in the tip pool need to be employees. Second, the tips must have been given to employees. People participating in the tip pool cannot include workers who do not regularly get tipped or are not in the chain of service. For example, it would not be appropriate for a cook or a janitor to participate. Also, supervisors, managers, the owner, and the employer are not allowed to participate in the tip pool. If an employer does not follow these rules, it has violated California labor law, with certain exceptions that an attorney can explain further.

Tips are left voluntarily and are not given by an employer. As a result, they are not considered part of your regular pay rate when your employer is calculating overtime that must be paid. Tips are distinct from a mandatory or compulsory service charge that a patron must pay as a percentage of the total bill, when it is listed in a contract or on the menu of an establishment. For example, if customers at the restaurant where you wait tables are required to pay a mandatory service charge of 15% for groups of six or more, this would be an amount owed to the restaurant and not voluntarily left for wait staff. An employer that sets a service charge distributes it at its discretion, and it is included in the regular rate of pay when determining overtime payments.

If your employer improperly takes tip credits or violates tip pooling rules, your avenues of recourse are to file a wage claim with the Division of Labor Standards Enforcement (DLSE) or to file a civil lawsuit to recover the lost wages.

Contact a Dedicated Wage and Hour Attorney in the Los Angeles Area

If you are concerned about a potential violation regarding tip credits and tip pooling, the Nourmand Law Firm may be able to assist you. We offer knowledgeable and tenacious advocacy to workers in Los Angeles, Riverside, San Bernardino, San Diego, Palm Springs, Beverly Hills, Van Nuys, Santa Ana, Newport Beach, and other cities in Los Angeles, San Diego, San Bernardino, Riverside, and Orange Counties. Call us at 800-700-WAGE (9243) or contact our attorneys through our online form.

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