The laws surrounding wages and tips in the California restaurant industry can be confusing, and both employee and employee often misunderstand. There are times when tips are the property of the employer. There are other times when the tips are the property of the server or pool of servers and similarly tipped personnel.
The issue of the rights of employers and employees in the realm of proper compensation can lead to wage claims by the employees if not well understood. As noted by the United States Department of Labor, Wage and Hour Division, with limited exception, the tipped employee is the exclusive owner of the tip. As such, an employer cannot take any part of the tip to cover any business expenses.
Protection of servers’ tips
If a server accidently drops a plate and it breaks, the employer cannot force that business expense of the cost of the plate onto the employee. The same is true of a server whose customer orders, eats and then runs out the door without paying the bill. This legal prohibition to employer tip-taking applies regardless of the wages otherwise paid to the employee, and notwithstanding if the employer pays greater than minimum wage to the employee. This may make sense when one considers that the customer, when tipping the server, is intending the payment to be to the server alone and has no intention of the employer taking the tip for its own business profits.
Exceptions to the no tip-taking rule
There are exceptions, however, in terms of individual servers’ tips. If the employer has in place a tip pooling arrangement, then some or all of servers’ tips can go into the pool for sharing among the pool participants. However, the employer cannot take a piece for itself.
There are times when a restaurant has, as part of its meal charges, a mandatory 15 percent or 20 percent tip inclusion in the customer’s bill. This is most often practiced when the dining party is of a certain minimum number of people, such as a party of eight or more. When the tip is compulsory, the law considers it not a tip, but a charge to the customer. In that case, the employer owns the tip and the employee does not. The employer can and often does pay it to the employee, but it is not a requirement.