Tipping is a fundamental part of the restaurant and hospitality culture in the United States. In states like California where the cost of living is high, many service workers rely on tips to supplement their income and to achieve financial stability.
Many businesses try to find a way to ensure their workers are properly paid and may resort to tip pooling, but is tip pooling legal? Or is it just a way for business owners to minimize their costs?
What is Tip Pooling?
Tip pooling is a system whereby employees combine their tips and then redistribute them, either evenly, or based on a predetermined formula among the eligible staff. It’s a method used to ensure a more consistent and equitable distribution of tips for workers, rather than relying solely on individual customer interactions.
What Is Tipping Etiquette in California?
Most customers tip between 15% and 20% of their bill for sit-down service. Because tips are a voluntary gesture of appreciation, they legally belong to the employee who provided the service. However, depending on the nature of the business (fast food, sit-down restaurants, ghost kitchens, etc.) many establishments implement tip pooling or tip sharing policies to distribute earnings more equitably among the team.
Is It Legal to Pool Tips in California?
Tip pooling is legal in California, but it must follow very specific rules outlined in California Labor Code 351, 353, and 354. For example, tip pools can only include employees who directly contribute to the customer experience, such as servers, bussers, bartenders, and sometimes kitchen staff, and the distribution must be reasonable and fair, like a set percentage system (e.g., server 70%, bartender 20%, busser 10%).
Employers must also pay their employees a full minimum wage separately and cannot use tips to make up for it.
Additionally, employers and managers are prohibited from taking any portion of their employee tips and must keep accurate records of any distribution. Failure to do so will make the employer guilty of a misdemeanor, which is punishable by a fine not exceeding one thousand dollars ($1,000), imprisonment not exceeding 60 days, or both. As long as employers follow California law, tip pooling is not only lawful, but can encourage employees to work harmoniously to provide excellent service.
Which States Allow Tip Pooling?
Tip pooling is generally permitted across most U.S. states, but how it is implemented and regulated varies widely. Here’s a breakdown of common practices:
- California, Washington, Oregon, Nevada, and Alaska allow tip pooling, but do not permit employers to use tip credits to reduce minimum wage obligations.
- Most other states follow the federal Fair Labor Standards Act (FLSA), which allows tip pooling and permits tip credits (paying below minimum wage as long as tips make up the difference).
- Some states explicitly restrict who can be included in a tip pool, often excluding back-of-house staff unless they have direct customer contact.
California stands out by having strict employee protections and barring employers from taking any portion of employee tips, regardless of whether tips are pooled or individually earned.
What Is the Difference Between Tip Pooling and Tip Sharing?
Though often used interchangeably, tip pooling and tip sharing are not the same thing. Tip pooling is when all of the tips are collected into a central pool and then redistributed among eligible staff members according to a formula or percentage that is directed by the employer.
Tip sharing is when employees who receive tips voluntarily share a portion of their tips with other staff based on a custom or agreed upon percentage. While the difference between the two is very thin, both practices incentivize employees to work together as a team by sharing the gratuity to cultivate teamwork.
Can Kitchen Staff Get Tips in California?
Kitchen staff can lawfully receive tips in California, but only under certain conditions:
- They must be included in a lawful tip pool.
- They must contribute to the customer experience, even if indirectly.
- They must be non-managerial employees—managers and supervisors are still not eligible.
This development reflects a more inclusive view of the restaurant team, recognizing that kitchen staff play a crucial role in delivering quality food and service, even if they aren’t customer-facing. However, if the kitchen staff are not receiving tips or they believe their tips are being taken away by their employers, they may be eligible to file a claim with an employment attorney.
Can I Sue My Boss for Stealing My Tips?
If you believe your boss is intentionally and maliciously stealing your tips, you can have the right to sue your employer for violating California’s tipping laws. Some common scenarios that could justify legal action include the following:
- Your employer or manager is taking part in a tip pool or skimming tips for themselves.
- You were forced to share tips with ineligible workers (like supervisors or non-service staff).
- You were not paid your full tips by the next payday.
- Your employer used tips to meet minimum wage obligations (which is illegal in California).
- Credit card processing fees were deducted from your tips.
If employees have experienced tip theft, they can file an official complaint with the California Labor Commissioner (Division of Labor Standards Enforcement) or file a civil lawsuit against their employer with the aid of a skilled employment attorney. Should employees choose to file a claim, they can not only recover unpaid tips, but they may be able to recover interest, additional damages, and attorney fees.
Lawyers for Justice, PC Can Help
If you believe your tips are being mishandled, whether it’s from improper deductions, unfair sharing, or outright theft, you have the right to file a claim under California law and seek compensation for your financial losses.
LFJ is an employment law firm comprised of all women attorneys who excel in pursuing employment issues for women and marginalized communities. With over 15 years fighting for their client’s rights, the firm has recovered millions in financial compensation for their deserving clients. The legal team is committed to represent those who have been wronged by negligent and reckless employers. Don’t wait for justice; take the first step to reclaim your rights.
Call today at 818-JUSTICE or fill out our online contact form for a free case consultation!