Get Quick Legal Help...

    We usually respond in 5 minutes.

    Call or Message Us 24/7
    1-877-SUE-MY-BOSS
    Employment Law Divison

    California Tip Laws – What Service Workers Need to Know (With 2025 Updates)

    Under California law, you have the right to keep any tips that you earn. Employers may not offset your tips against your regular wages.1

    Tip pooling is legal as long as the money is not shared with owners, managers, or supervisors. Plus, your employer is responsible for any credit card fees on tips.

    If your boss misappropriates your tips, you can file a complaint with the California Labor Commissioner’s Office or file a lawsuit.2 Employers who violate tip laws also face criminal misdemeanor charges.3

    Graphic that shows employer duties re. tips in California, such as letting employees keep all tips without using them to offset their wage

    Below, our California labor and employment lawyers discuss everything you need to know about tip laws.

    Also listen to our informative podcast:

    1. Your Rights

    Under California Labor Code 351 LC, tips that are paid to you or left for you are your property.4 This means that your employer may not:

    Furthermore, what you earn in tips also cannot count toward your minimum wage or overtime pay. As a non-exempt employee, you are owed minimum wage and overtime rates by your employer separate and apart from any tips you receive.

    Even if you earn much of your income from tips, you must still be paid the minimum wage in California.6 This applies to servers, bartenders, etc.

    As of 2025, the California minimum wage for non-exempt employees is $16.50 an hour. Several cities and counties have higher minimum wage rates. Overtime is one-and-a-half your regular rate of pay, and you earn it by working more than either:

    • 8 hours a workday,
    • 40 hours a work week, or
    • 6 consecutive days in a workweek.7

    2. Credit Card Fees

    In California, your employer is required to pay all credit card fees on tips. It does not matter whether you work at a restaurant, spa, beauty salon, nail salon, etc.8

    In other words, your boss can NOT deduct the amount of a credit card fee from your tips. You are entitled to receive the full amount of the tip left by the customer. (This is different from federal law, where employers can reduce your tips by the processing fees.)

    Also, when patrons leave tips on a credit card, the tips must be paid promptly to you. Labor Code 351 requires employers to give tips to you by the next payday after the tip is paid.9

    3. Tip Pooling

    California employers are allowed to practice tip pooling, which is when all the tips are collected and split among employees in a fair and reasonable way. As with tips paid by credit card, pooled tip portions must be paid by the next payday.10

    Example: A chain coffee shop has a tip jar by the cash register. At the end of the week, the tips are given out to all employees who worked that week. Tips are divided based on how many hours each employee worked. This means that employees who worked on busy shifts get the same tips as those who worked slow shifts, but this is permitted under California tip law. 11

    Tip pooling (also called “tipping out”) may include employees who have some supervisory duties, like shift supervisors, if the tips are left in a collective tip box.12 Pooled tips at a restaurant may also be shared with staff who do not provide table service, such as hosts, bartenders, busboys, dishwashers, etc.13

    However, pooled tips may not be shared with managers who have the authority to hire or fire you. These managers are considered “agents” of the employer, so it is illegal for them to take a portion of tips under Labor Code 351.14

    Large glass jar labeled "Tips" in big red letters against a white background, and it contains several dollar bills and coins.

    Under California Labor Code 351 LC, tips are the property of the employee they are paid to or left for.

    4. What counts as tips?

    Under California tip law, a tip is any money that is:

    1. Paid, given to, or left for you by a customer of a business, and
    2. Not part of the amount the customer was required to pay for services, goods, food, or drink.15

    5. Service Charges

    Some businesses will add a required “service charge” to a customer’s bill. Unlike with a traditional tip or gratuity, the customer has no choice but to pay this amount.16

    In general, service charges are not considered tips. Employers can keep them for themselves.17

    However, some cities like Santa Monica,18 Berkeley,19 and Emeryville20 require service charges to be passed on to employees.21

    Whether a service charge is a tip depends on the exact facts: It matters how the service charge is presented to employees and customers. If an employer passes on service charges to employees – but they are not technically “tips” – then that money is subject to tax withholding.22

    6. Can I sue my boss?

    You cannot sue your employer under California’s main tip law, Labor Code 351 LC.23 However, there are other grounds upon which you can sue.

    For example, you could sue your employer for conversion. In this type of suit, you argue that an employer has stolen your tips.24

    You can also file a lawsuit under California’s Unfair Competition Law. This is because defying California’s tip law can be an unfair business practice.25

    Finally, you can sue for breach of implied contract. You would argue that your employer broke an agreement with its customers to give all tips to workers.26

    Note that if your employer is withholding tips from your co-workers as well, you may be able to join together and bring a class action lawsuit.

    Labor Board Complaints about Tip Law Violations

    You can also file a complaint with the California Labor Commissioner’s Office for a tip law violation.27 The Labor Commissioner’s Office will hold a hearing, which is simpler and quicker than a court proceeding.28

    If your Labor Board complaint is successful, the Labor Commissioner will order the employer to pay you what you are owed. If a tip law violation led to you getting less than minimum wage, the employer may have to pay extra “liquidated damages” too.29

    Criminal Charges

    Employers who violate LC 351 are guilty of a California misdemeanor crime.30 Your employer can face up to 60 days in jail and/or a fine of up to $1,000.

    California law requires employers to keep detailed records regarding all tips received and paid out. These records can be used as evidence in a criminal case.31

    Older gentleman inmate in his cell holding the cell bars while looking through them

    An employer can face up to sixty days in jail, and/or a fine of up to $1,000, for violating California tip laws.

    7. Statute of Limitations

    California law sets different “statutes of limitations” (deadlines for filing) for different types of lawsuits. Under California tip law, the important statutes of limitations are:

    • A “conversion” lawsuit needs to be filed within three (3) years after the employer broke the law.32
    • A tip law violation lawsuit under California’s Unfair Competition Law must be filed within four (4) years.33
    • A lawsuit for breach of implied contract due to withheld or diverted tips must be filed within either two (2) or four (4) years. The two-year deadline applies if the contract was an oral agreement not in writing.34 The four-year deadline is for breach of written contracts.35
    • Labor Board complaints should be filed within three (3) years of the tip law violation.36

    8. Employer Retaliation

    It is illegal for California employers to retaliate against you for reporting tip law violations.37 Examples of retaliation include:

    If you are a victim of workplace retaliation, you can file a complaint with the California Labor Commissioner.

    Additional Reading

    For more in-depth information, refer to these articles:

    Legal References:

    1. Labor Code section 351 (“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.”). Note that California law re. tips is stricter than federal law. See Restaurant Law Center, Texas Restaurant Association v. United State Dept. of Labor (Tex. 2024) Case: 23-50562.
    2. Same.
    3. LC 354.
    4. Same.
    5. Same. Tips and Gratuities, California Division of Industrial Relations (“Unlike under federal regulations, in California, an employer can’t use an employee’s tips as a credit towards its obligation to pay the minimum wage. California law requires that employees receive the minimum wage plus any tips left for them by patrons of the employer’s business.”). Many states and federal law permit tip credits, unlike California.
    6. Henning v. Industrial Welfare Com. (1988) 46 Cal.3d 1262.
    7. Industrial Welfare Comm’n vs. Superior Ct. (Cal. Supreme Court, 1980) 27 Cal.3d 690. Minimum Wage, California Department of Industrial Relations. See also Minimum Wage under Federal Law, U.S Department of Labor. See also Fair Labor Standards Act (FLSA). In California, the minimum wage for fast food workers is $20 an hour. AB 1228 (2023). California Labor Code section 510.
    8. LC 351.
    9. Same.
    10. Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062.
    11. Davis v. International Coffee & Tea, LLC, E066700 (Cal. Ct. App. Apr. 3, 2018).
    12. Chau v. Starbucks Corp. (2009) 174 Cal.App.4th 688.
    13. Budrow v. Dave & Buster’s of California, Inc. (2009) 171 Cal.App.4th 875.
    14. Jameson v. Five Feed Restaurant, Inc. (2003) 107 Cal.App.4th 138. See also Cruz v. Fusion Cafe, Inc. (Cal.App. 2020) 7 Cal. App. 5th 221.
    15. LC 350.
    16. See Searle v. Wyndham Int’l (2002) 102 Cal.App.4th 1327.
    17. Compare Garcia v. Four Points Sheraton LAX (2010) 188 Cal.App.4th 364 (mandatory service charges are not the same as tips) with O’Grady v. Merchant Exchange Productions, Inc. (2019) 41 Cal.App.5th 771 (some mandatory service charges are covered under LC 351). Cindy Carcamo, Is a dine-in service fee a tip? Former servers allege in suit they are owed gratuities from Jon and Vinny’s, Los Angeles Times (June 21, 2023). Slaffey and Jobe v. Joint Venture Restaurant Group (Los Angeles County Superior Court, 2023) Class Action.
    18. Santa Monica Municipal Code 4.62.010(g).
    19. Berkeley Municipal Code 13.99.050.
    20. Emeryville Municipal Code 5-37.04
    21. See Garcia, note 17. See Cindy Carcamo, City investigating Hollywood restaurants for allegedly keeping service fees, stiffing workers, Los Angeles Times (May 16, 2023).
    22. O’Grady, note 17.
    23. Lu v. Hawaiian Gardens Casino (2010) 50 Cal.4th 592.
    24. Same.
    25. O’Grady, note 17.
    26. Same.
    27. LC 355 & 98.
    28. LC 98.1.
    29. Same.
    30. LC 354.
    31. LC 353.
    32. California Code of Civil Procedure 338.
    33. California Business & Professions Code 17208.
    34. California C.C.P. 339.
    35. California C.C.P. 337.
    36. See “Report a Violation: When to Report,” California Labor Commissioner’s Office.
    37. LC 1102.5.

      Contact Our Firm

      We usually respond in 5 minutes.

      1-877-SUE-MY-BOSS