Tip-Pooling – Can My Employer Take My Tips and How? (2023)
Some History
Some HistoryFor better or worse, tipping has become an accepted part of American commerce. It is a practice that first emerged in the late 1800s. In 1917, the California legislature passed a law for the first time prohibiting employers from taking any portion of employees’ tips. However, the courts struck down the law as a violation of constitutional due process. The legislature tried again in 1929 and this time succeeded. However, now the law permitted employers to credit tips against employees’ wages, i.e., use tips in place of wages. It wasn’t until 1975, after repeated failed attempts, that the legislature was finally able to pass a law that prohibited the practice of “tip credits”.
Labor Code § 351
California Labor Code § 351 now reads:
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, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer.
Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.
An employer that permits patrons to pay gratuities by credit card shall pay the employees the full amount of the gratuity that the patron indicated on the credit card slip, without any deductions for any credit card payment processing fees or costs that may be charged to the employer by the credit card company. Payment of gratuities made by patrons using credit cards shall be made to the employees not later than the next regular payday following the date the patron authorized the credit card payment.
Interestingly, the federal law – the Fair Labor Standards Act – continues to permit “tip credits”, though with restrictions. As usual, California laws continue to offer greater employee protections than their federal counterparts. While federal laws usually trump or “preempt” state laws, courts have ruled that this is not the case with the FLSA and the California Labor Code. Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 567; Skyline Homes, Inc. v. Department of Industrial Relations (1985) 165 Cal.App.3d 239, 250-251.
Section 351 seems pretty simple and straightforward. However, it also left open some important unanswered questions that the courts took it upon themselves to answer.
Can My Employer Take My Tips?
Yes. . .
Many industries, particularly the restaurant industry, have a “house” practice of mandatory tip-pooling, in which the employer takes employees’ tips, pools them, then allocates the money to its employees as it sees fit. Tip pooling is nowhere mentioned in section 351 and that would therefore seem to make it an illegal “taking” of the employee’s “sole property”. However, the courts engaged in some fancy analysis to conclude it is permissible, so long as the distribution is “fair and reasonable”. Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062. So to that extent, yes, your employer can take your tips away from you.
. . . and no
But the employer can’t take any part of your tips for itself either. Even if your employer sets up a mandatory tip pool, it and its “agents” (meaning any employee with managerial/supervisory functions) are prohibited from getting any of the money from that pool. That is clearly stated at the very beginning of section 351: “No employer or agent shall collect, take or receive any gratuity or part thereof . . .”.
So Who Can Participate in the Tip Pool?
Here is where things get tricky because the courts seems to be all over the place. Section 351 makes it clear that employers and their supervisory/managerial agents cannot get any of the money from a tip pool. But it is unclear what other employees can. Can the tip pool monies be allocated to dishwashers? Busboys? Sushi chefs? Janitors? Accountants? Security guards? Etc. Where do you draw the line?
Since 1990, the bright-line rule was that only those employees who are involved in “direct table service” are entitled to participate in the tip pool. Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062. However, that all changed recently.
In March 2009, a court held that employees who did not engage in direct table service could still participate in the tip pool, so long as they were in the broader “chain of service”. Etheridge (Brad) v. Reins International California, Inc. (2009) 172 Cal. App. 4th 908. So, for instance, bussers who clear away plates after a customer has already left might not qualify as having engaged in “direct table service” but would qualify as having been involved in the “chain of service”, and so could participate in the tip pool. Another court held that bartenders could participate in tip pools, even if they never directly brought drinks to the customer’s table (although there the court stuck with the old model and ruled that this was “direct table service”). Budrow (Aaron) v. Dave & Buster’s of California, Inc. (2009) 171 Cal. App. 4th 875.
In June 2009, a court reversed an $86 mil. judgment when it held that supervisory/managerial agents could share in “collective tip boxes” because they were not “tip pools” but “tip allocations”. Chau v. Starbucks Corp., 174 Cal. App. 4th 688 (Cal. App. 4th Dist. 2009). I call this one the “Starbucks exception” because it only seems to apply if you work at Starbucks.
In February 2016, there was a major development. The Ninth Circuit Court of Appeals overruled several federal judges and sided with the US Department of Labor in saying that tips can NOT be shared with cooks and dishwashers since they are not “customarily” tipped by customers. Oregon Restaurant & Lodging Assoc. v. Perez (9CCA, Feb. 23, 2016,
So the question of which specific employees can participate in a tip pool remains up in the air, to be answered on a case-by-case basis. The key for the courts is the intent of the tipping customer. If the tipper (arguably) intended that a type of employee share in the tip, then they are participants in the “chain of service” and/or “direct table service”. An accountant or security guard probably would not qualify under this standard, but a bartender and busser probably do.
My Employer Has Violated the Tip Laws, Can I Sue?
Yes you can. At the moment, it is unclear whether you have a private right of action under section 351. The California Supreme Court is considering that question at the moment. Lu (Louie Hung Kwei) v. Hawaiian Gardens Casino, Inc., 2009 Cal. LEXIS 5505 (Cal. May 26, 2009).
However, as your lawyer can explain to you, you can still probably bring a claim for violation of the California Unfair Competition Law (California Business & Professions Code 17200 et al.) and/or for penalties under the California Private Attorney General Act (California Labor Code § 2698 et al.). But I recommend you leave that to your lawyer.
Can a employer Keep cash tips and dispurse them on our next paycheck without a breakdown of how it was distributed. The tips are taken each night and put into an envelope.So no one actually knows the total of the tips and how they are distributed.
I would like to know the law about tipping out. Our restaurant requires us to tip out bartender, cooks, food runners and expo. I have no problem tipping people out but bartender is getting 4% of total sales. They should only be receiving alcohol sales along with the other 3 only receiving food sales. Also we are required to tip out on tables that did not even tip us. How is this legal?
I work in retail. I am a wardrobe stylist. I had a 4 session with a client. When she left she whispered in my ear to look under the popcorn bowl where she had left me $100. I got in trouble for accepting it even though she left it for me to get after she left the building. I showed the key holder that night and brought it back the next morning. I was excited to tell the staff that I wanted to treat them to a party with it. One particular employee threw a fit that I was not allowed to accept it nor take it home. I was then questioned by my manager and she confiscated the money and sweet note. A week later I was told loss prevention was going to allow the ‘store’ to keep it and go ahead w the party. The managers decided what to use the money on for the party. It was very humiliating to be called out and have it taken away. What is your take?
Can owner get tips if owner works as a sever by herself? Or can owner get Togo tips if owner handles every Togo order by herself and a sever takes care of dine in customers.
Thank you.
Can owner make rule how much the servers pay to Hostess?
My boss make us to pay to a hostess same amount of tip as server. Hostess is not a server, just answering phones and greet customers. Why can owner make us to share our tip equarly with a hostess while servers are working so hard physically and emortionally?
My employer takes a tip credit and pays us from the tip pool and we are back of house employees. Is this legal?
When the law states that an employer cannot “collect” tips, I understand that to mean “keep your hands off our tips, do not scurry away with them upstairs before we have had a chance to count them!”, collect means to gather…
I wish we had unions.
when participating in tip pool we tip out almost 10% of sales to staff (most to chefs) on a per check basis. not over all. so if we receive no tip we are paying money from other tips received from other tables.we have been forced to pay into tip pool even when no tip is received. this is actually against our policy. no to mention that is states that any tip received is less than tip out requirements we are not to tip. we are still being forced to do so as well. what do i do as hundreds of employees are being forced to go again company and store policy. when i mentioned it i was threatened with right ups and discipline. now i im being written up for questioning their practices
nice work keep it up.
Thanks for sharing this it very helpful info for me or other peoples
At my restaurant, they require all servers to put cash tips in a box. There was never any agreement established on the percentage on how the tips are dispersed. The owner keeps the tips and never shows the amount that was made. All I know is I work nine-ten hour shifts and somehow never make any more than $100 a night. All servers agree that the tips do not seem right, meaning we believe the owner is keeping tips for themselves. Is this really legal? Are they allowed to never disclose the percentages and what amount of tips were collected that shift?
I am a team member at a fast casual restaurant, we take orders, make the food and serve customers. When I originally started working here they said we were not allowed to accept tips at all. After two years of working here they had gotten a new register system and decided to try out accepting tips. They told us this and started to accept tips 2 weeks prior to making the decision if they were actually going to accept tips and give them to us. They had decided to go ahead and accept tips but only on card payments and not in cash. After the pandemic first broke out they were telling us we weren’t accepting tips so that customers would not have to touch the same touch screen to fill out the tip option. Although saying this I saw my boss still accepting tips from customers but not paying us for them. I had asked him about it and he said they were going to give them to us which they did. After that they had removed tips completely from the system. After all of this customers will still leave cash tips weather you tell them you accept tips or not. So when people leave cash tips on the table or counter ware told we can not accept those and we have to put the tip into the register. The thing is when we put the cash into the register there is no way to log that cash as a tip in the system so it goes in as extra money to the restaurant. Is that legal?
Our employer is not allowed to participate in the tip pool
some employer policy
hey, my boss takes the pool of tips every night and counts them at home, and brings it back, all of the employees think that the tips are not fair and properly counted. how can we deal with that?
Is this right/legal? The restaurant I work at takes 2.4% of my total sales for other employee tip out. (can’t recall who gets it) Tipping bussers is up to server some nights there is no busser which is great but management wants us to tip 20% of total sales to them. All they are suppose to do is reset the table & pour the water. Servers clear all plates, utensils & cups. At the end of the night when we clock out on an ipad, it asks how much we’re claiming. I was told 10% of my total sales is what i should put in. I read on a website ca law is claiming a min of 8%. So in theory when i enter my claimed tips on the ipad, it should be 5.6% of total sales? I just want to know what my rights are when claiming tips. Or if you could direct me to a website that helps explain. Thank you!
My previous employer automatically deducted 3.75% of our sales for a tip share. This would at times cost the server money if a table didn’t tip because it was calculated based on sales and not tips. Is this legal?
No, that is an invalid form of tip pooling in 2018 according to the IRS.
I have been at my job for about 2.5 years, my employer takes 30% of credit card tips and give to the kitchen staff, how ever they only get 1$ per hour worked. I guess my question is he can’t pocket the money can he? Doing the math there was no way the kitc en gets all of the money that is being pulled from my tip check.
So I work at a place where we dont have table service so we have a tip jar. At the end of the night the money is counted and split between everyone equally. I work with a lot of teenagers that don’t finish their jobs on time becuase they play around and stare at their phones. So when I’m done my employer makes me do their work too. He says if I don’t do it and leave when all of my work is done that he won’t give me a cut of the tips. Is this legal?
My restaurants makes us tip out the busses food runners hostess bartenders 6% of our tips about 30% of our sales , then they forces us to put tips together and pool with the other servers,no one wants to so this .esentially we have 2 systems going on ,tip out people that help us, then put what’s left together And split that up.is it legal to do this. I have no problem tipping out busters food runners bar hostess but I don’t like having to then pool the rest of our tips.sonany person the hire off the street , makes the same money as we do and we have to turns that.
My employer takes our tips and gives it out to every employee by hours worked, is he allowed to take all the tips from me and evenly divide it by hours? Or is it only supposed to be a portion of my tips pooled to be distributed?
My employer has decided that we must hand over all of out tips and then he will tip out the percentages required and give the rest to us. Is this legal? Shouldn’t I be in control of my money?
I work for a Mexican restaurant and I have to put all my tips in a bucket with out having any knowledge on how much I made and I don’t get my tips till next day I work I am server and I never ever did this on any other place so I am confused??? I guess the manager counts them with out me being there !! I need help please ???
Hi I work in a restaurant and the owner my boss wants since this coming January that all of us their waiters share 1%of our tips to the cooks dishwashers etc I am a little confused if this is legal. And he wants to us sign a piece of paper that state I am totally agree to share this tip.
its legal as long as no owners or management get tips. Usually your employer wants you to pay the BOH tips because your employers is paying them cheap ass wages. The dishwasher is what keeps your restaurant moving and thats one of the most important positions (lowkey) but they dont pay him shit I’m sure. The cooks and chefs should be making good hourly and wouldn’t in theory need tips. But your boss is prolly cheap.
Hello, my questions is, I’m a busser at a restaurant and the waiters give me tips. They are suppose to give me the tips on a everyday basis. I have not received tips by a few waiters in the last few month. I talked to my manager and she told me that “she was not my babysitter and that it was my responsibility to ask for my tips at the end of my shift” I would ask for them almost everyday that I work but, no luck. I resigned from my positions and was not able to collect the tips that are owed to me. I’m able to file a complain with the labor commissioner?
I think you should go ahead and file the labor board complaint. If you brought the theft of your tips to the attention of management, I think it was management’s responsibility to put a stop to it.
No because you are not entitled to their money only they are and it is actually illegal for a restaurant to force them to give you their money. They can suggest it, but they can not force them.
It is not THEIR money. what makes a server believe that the customer meant for only the server to keep all that money and not share? Because the server decided it. And that is wrong. The busser should be tipped every shift.
Can a boss in a bar take from you $40 t0 $100 out of each check for tips being taxed and you only work 16 hours a week?He says his book keeper told him to do it.
nope. COMPLETELY against the law. California is like the only state where your employer cant tax your tips. You need to claim them for your taxes, but he shouldnt be touching your tips or taxing you anything. (CALL THE LABOR BOARD)
it’s a little I work at Park and play Hollywood Casino or contract except early and are tips go into a pool or are managers supposed to be able to get pool they react they help out a little bit very little some of them don’t even help out a lot and they get tipped out we have 4 different managers.
I have questions about the tip in my restaurant. Would you please contact me?
Thanks
i work in a catfish restuarant in california and my employer/owner puts [art of our tips in her bra when she is cleaning a table. several customers have see her do this, what can i do?
FILE A LABOR BOARD COMPLAINT. Have some of your guests sign an affidavit for you and sue her.
i WORK FOR A LG. PIZZA CHAIN IN SO. CAL THEY TAKE ALL OUR TIPS , WHEN I WAS HIRED NOTHING WAS TAKEN , THE 50% , THE 100% ITS NOT FAIR IVE GOT 250/300 EVERY CHECK, IT HURTS…HAY ITS CC TIPS …
thats against the law. FILE A LABOR BOARD COMPLAINT
I bet no-one has heard of a restaurant like this. The place where I work has a tip jar up front and by the way this is a whole in the wall place where it’s run by father and son. So there’s only a hand full of employees. Well a Customer will come in and order and see how hard we are working cause no one really has a designated spot we just do what needs to me done for example there’s many day I do it all except for take the order at the counter, but I cook it expo it deliver to the customers table and clean up after. But back to what I was saying the custome will see how hard we are working and ask the owner does this tips go to them and the owner says yes I give them a paid vacation and a Christmas bonus this helps pay for it. But only girls that has been there for a year can benefit from it. Ok that’s fine. But we are so busy at this restaurant and I have counted the drawer and tip jar many of times on in slow and busy nights out of the 8yrs I’ve been there and I have never once seen less than $20 in the tip jar and that’s not excluding the credit card tips if u do $20 × 300 days that’s $6000. And there is way to many days where there is like $50- $60 in the jar. Well his bonus is only like $250 and his pay vacations well biggest one giving is to a girl that works like 50 hours a week and hers was $500 the most I ever got was $250 doing 35- 40hrs a week . And let’s take into consideration that he only gives out bonuses and pay vacation to the most 5 people. So that means not even giving out half of the tip money
He’s just collecting it for himself. Is this right?is this illegal? Someone please help me
I work at an event planning company. Every weekend we have events that we attend to and we set up and clean up, sometime the client pays for full coordination. We usually have moms that give us tip, sometimes directly to us (the employees) or to the employer (my boss) saying it is FOR US. the employees. but their rule is that they take everything, and if we get handed tip, we have to hand all the tip over to them.. What am i supposed to do. If i file a lawsuit against them, what is the percentage possibility that I will win.