By Pooja Patel and Anthony Zaller
An issue that constantly plagues the service industry is what to do about tips and the challenges that come with mandated tip pooling and mandatory service charges. This week’s post is an update and a general discussion about tipping and mandatory service charges. This simple concept is surprisingly complex for employers. Here are five issues employers should understand about tips in California.
1) Who owns a tip?
California law is clear that voluntary tips left for an employee for goods sold or services performed belong to the employee, not the employer. Labor Code section 351 provides, “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.”
2) Is employer-mandated tip pooling legal?
Yes, generally tip pooling is legal in California as long as it is fair and reasonable. In Leighton v. Old Heidelberg, Ltd., the court held that an employer’s practice of tip pooling among employees was not prohibited by section 351 because the employer did not “collect, take, or receive” any part of a gratuity left by a patron, and did not credit tips or deduct tip income from employee wages. The court relied upon the “industry practice” that 15% of the gratuity is tipped out to the busboy and 5% to the bartender, which was “a house rule and...
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