Employment Law – Increase in Minimum Wage in some California Cities is a Good Time to Review Tip Pooling Laws

California’s minimum wage is currently $9 per hour and will increase to $10 per hour on January 1, 2016.  Several California cities (such as the City and County of Los Angeles, San Francisco, and Oakland) have recently passed laws to eventually increase the minimum wage to as much as $15 per hour.

The rising minimum wages are creating considerable anxiety in the restaurant industry, as tipped workers (many of whom already earn more than $15 per hour) have thus far not been exempt from the new minimum wage laws.  Therefore, a tipped worker who is currently paid the minimum wage plus tips that results in total pay of over $15 per hour will eventually have to be paid the prevailing minimum wage plus tips, assuming tipping is still in fashion by that point.

Therefore, now is a good time to review California law on tipping.  The California Labor Commissioner has a good description of tipping law, but here are the highlights:

A tip is considered money paid to the employee, not the employer.  However, a mandatory service charge is considered money paid to the employer.  The employer then has the discretion to choose to distribute some or all of the service charge to the employees.

An employer cannot reduce wages based on tips received by that employee.  Therefore, an employer cannot fulfill payment of a minimum wage by paying a minimum wage but crediting/reducing the wage by the amount of tips received by that employee.

An employer can require tips to be pooled or shared with other employees who provide “direct table service” or who are in the “chain of service.”  This can include busboys and bartenders.  In general, supervisors or mangers or employers are not supposed to share in tip pooling.  However, in one situation a California court has approved of shift supervisors receiving part of a tip pool where their duties primarily consist of directly serving customers and tips are given to a collective tip jar where it was expected that all employees who served customers would share the tips.


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