Tips, Tip Pooling, and Tip Credits - How to Spot Illegal Practices | Mann & Elias
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Tips, Tip Pooling, and Tip Credits – How to Spot Illegal Practices

California Laws Surrounding Tipped Employees

If you work as a barista or a server, you know that tips are essential to your livelihood. Since tips are a large part of your monthly income, you should know your legal rights regarding them. Many servers have had to reach out to attorneys for wage disputes in Los Angeles after they realize that they have missed out on wages due to an unlawful practice of their workplace.

If you feel you need to sue an employer for unpaid wages, look no further than the experienced lawyers our clients have trusted at the Offices of Mann & Elias to handle employment cases. We can examine your case and appoint a Los Angeles workplace lawyer to ensure that your employer gives you your unpaid wages.

Many employers rely on their workers’ ignorance when it comes to unfair labor practices. It’s possible that they know what they’re doing is illegal, but they are hoping that none of their employees find out and seek out legal representation. The first step you can take to ensure you aren’t being exploited is to educate yourself on the laws surrounding money earned from tips.


A tip is an additional amount left by the customer as a reward for good service. Tips are yours to keep, not your employer’s. Labor Code section 351 mandates, “No Employer or agent shall collect, take or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron…. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.”

Tips are for customer-facing roles, and managers and supervisors are not eligible for tips under California law. If your manager has been taking a portion of your tips, then you should contact an attorney about filing a claim to get that money back.

Tips that are left through credit cards are subject to a small processing fee that the restaurant has to pay. Your workplace is not allowed to deduct the credit card processing charge from your tips or your wage in California. The customer’s gratuity, whether they pay it via credit card or not, must be provided to the service staff.

Tip Pooling

Many restaurants, bars, and cafes operate using a tip pool, where the tips employees earn are divided among all the customer-facing roles in the restaurant. A tip pool is meant to encourage unity and to ensure that all customer-facing roles earn a decent amount, even if they get a stingy customer. This means that bartenders, hosts, and busboys also receive a portion of the tips, and their portion is usually smaller than what each server earns.

In late 2020, The Fair Labor Standards Act amended its regulations regarding tip pools. Employees that do not regularly and customarily receive tips cannot receive a portion of the tip pool. This means that back-of-house staff, such as cooks and dishwashers, are not eligible for inclusion in the tip pool. There are ways to get around this, as a non-traditional tip pool incorporates these kinds of employees, but the Fair Labor Standards Act makes one thing clear; A tip pool should only benefit non-managerial roles, meaning that restaurant owners and managers cannot take any money from the tip pool.

Additionally, the Fair Labor Standards Act implemented new rules surrounding record-keeping of tip pool collections. Employers are required to identify which employees receive tips on their payroll or other records, and they must keep a written record of the amount of tips received by each employee.

Tip Credits

Since servers are paid less than minimum wage, tips are vital to their income. Under federal law, employees must receive enough tips to make up the difference that comes from being paid so little. Employers can count an employee’s tips towards their obligation to pay minimum wage in a practice called a tip credit.

Your employer can only take a tip credit only if you regularly earn more than $30 in tips per month. The federal government allows the maximum tip credit to be $5.12. This means that employers may pay tipped employees as little as $2.13 per hour, as long as the employee makes enough in tips to earn at least $7.25 per hour, the current federal minimum wage.

Contacting an Attorney

If you suspect your employer is being dishonest about tipping practices, then you should contact an attorney who is well-versed in California labor laws. You and your legal counsel can review the situation and figure out if you need to sue for unpaid wages.


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