Can An Employer Withhold Tips? What California Law Says

Can An Employer Withhold Tips? What California Law Says

Tips are an essential part of the service industry, offering a way for customers to show appreciation for excellent service. However, there are instances where employers unlawfully withhold tips, depriving employees of their hard-earned income.

This blog explores whether employers can legally withhold tips in California, what tips are meant for, the consequences for employers who violate the law, and what employees can do to protect their rights.

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Withholding Tips: What It Means

Tips offer the opportunity to reward employees for their exemplary service by voluntarily offering additional payments. This is practiced in various service-oriented establishments, including restaurants, bars, cafes, hotels, and other hospitality-related businesses. 

The distribution of tips can vary depending on the establishment’s policies. In some cases, tips may be shared among all employees, while in others, they are allocated solely to the employee who directly served the customer. 

Regardless of the distribution method, the fundamental principle remains the same: tips belong to the employees who earned them, and employers or business owners should not withhold or redirect these gratuities for their own benefit.

The Purpose of Tips

For service workers, including back-house employees, who often earn an hourly wage, tips act as a significant supplement to their earnings. As an added value to their income, tips are treated as the employee’s property — like a gift from the customer for their exemplary service — and is entirely separate from the wage that they receive from their employer.  

Ensuring Minimum Wage Compliance

Employers are responsible for ensuring that their tipped workers earn at least the federal standard minimum wage, including tips. If an employee’s hourly wage and tips combined do not meet the minimum wage requirements, the employer is obligated to make up the difference to ensure compliance.

Mandatory Tip Pools

Some establishments implement mandatory tip pooling arrangements, where a portion of the tips collected from customers is shared among eligible employees. This practice aims to create a fair distribution of gratuities among the service staff, including servers, bussers, and non-tipped employees, such as dishwashers, cooks, and cleaners.

Balancing Earnings and Motivation

Employee tips offer a unique opportunity to control their earnings to some extent. Exceptional service can lead to higher tips, creating an incentive for employees to provide outstanding customer experiences. Conversely, it also highlights the importance of delivering exceptional service, fostering a motivated and attentive workforce.

Customer Choice and Discretion

Tipping is voluntary. This personal choice allows customers to reward outstanding service while also holding employees accountable for their performance.

can an employer withhold tips

Related Laws on Wages and Tips in California

In California, the rights of service employees concerning tips are protected under the state’s labor laws.

  • California Labor Code Section 351: This states that employers are strictly prohibited from collecting, taking, or receiving any part of gratuities or tips paid, given, or left for an employee by a patron. It safeguards the hard-earned income of service employees and ensures that they receive the full value of the tips. 
  • California Labor Code Section 204: This California wage and hour law states that all earned wages must be paid at least twice a month on regular paydays, as designated by the employer. It also specifies that employers cannot make any deductions from wages for cash register shortages, breakages, or other business expenses that might occur during the course of employment.
  • EDD Publication 115: The California Employment Development Department released a publication highlighting the guidelines on reporting tips on filing payroll taxes. 

Consequences for Employers

Employers who disregard California’s strict regulations concerning tip withholding put themselves at risk of facing severe consequences. The state’s labor laws firmly protect the rights of service employees. When employers fail to comply with these laws, they may be subject to significant penalties and legal actions, such as:

Reimbursement of Withheld Tips

One of the immediate consequences employers may face for violating tip withholding laws is the obligation to reimburse their employees for any tips that were wrongfully withheld. This includes the full amount of gratuities or any portion of tips that the employer or agent attempted to retain.

Fines and Monetary Penalties

In addition to reimbursing employees, employers may be subjected to fines imposed by the California Labor Commissioner’s Office. These fines are a punitive measure to discourage future violations and highlight the seriousness of the offense.

Legal Action and Lawsuits

Employees who have experienced tip withholding may pursue legal action against their employers. Lawsuits can be costly and damaging to an employer’s reputation, making it imperative for businesses to adhere to the law and treat their employees fairly.

Damage to Reputation

Violating tip withholding laws can lead to negative publicity and harm the employer’s reputation. News of such violations can spread quickly through word of mouth and social media, impacting customer trust and loyalty.

Investigations by Labor Commissioner

The California Labor Commissioner’s Office takes employee complaints about tip withholding seriously and actively investigates alleged violations. Employers may face scrutiny, audits, and inquiries into their employment practices, leading to potential repercussions if any violations are uncovered.

Potential Criminal Charges

In cases of tip withholding involving intentional fraud or deception, employers may face criminal charges. This could result in more severe penalties, including fines and even imprisonment.

How to File a Claim for Unlawful Tip Withholding

If employees suspect that their employer is unlawfully withholding tips, they should take the following steps:

  • Document Tips: Keep accurate records of all tips received, including details like dates, amounts, and the source (if possible).
  • Gather Evidence: Collect any evidence supporting the tip withholding, such as witness statements, CCTV footage, or other relevant documentation.
  • Report Internally: Raise the issue with a supervisor or HR department. Sometimes, the issue might be resolved internally without the need for further action.
  • File a Complaint: If internal efforts are not successful, employees can file a formal complaint with the California Labor Commissioner’s Office.
  • Contact an Employment Lawyer: Consultation with an experienced California labor lawyer can help you fight for your rights in the workplace, file claims for unlawful tip withholding, and get you the compensation you deserve.

Frequently Asked Questions (FAQs)

Can my employer force me to share my tips with other employees? 

In California, tip pooling or sharing is allowed under certain conditions, but employers cannot retain any portion of the tips for themselves.

Can my employer deduct processing fees from my tips made through credit card transactions? 

No, employers are not allowed to deduct credit card processing fees from employees’ tips. The full tip amount must be given to the employee.

What should I do if my employer retaliates against me for reporting tip withholding? 

Retaliation for reporting tip withholding is illegal. If you experience workplace retaliation, document the incidents and consult with an employment attorney to protect your rights.

Were you charged to get your tips?

You might be eligible to file claims. Consult with us.


In California, employers are prohibited from withholding tips earned by their employees. Tips are meant to be additional income for service employees, and employers must respect their employees’ rights to these gratuities. By understanding their rights and taking appropriate action, employees can protect their hard-earned tips and hold employers accountable for any violations.

Labor Law Advocates has award-winning employment attorneys who are experienced in handling tip and wage theft cases. We have a proven track record of successful claims, fighting for the rights of employees who experienced unpaid wages, workplace discrimination and other employment injustices.

Call us now at (424) 688-3632 for a free and confidential consultation.


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By submitting this form, I consent to receiving text messages and emails from Labor Law Advocates. I also acknowledge that contacting Labor Law Advocates through this website does not create an attorney-client relationship, and any information I send is not protected by the attorney-client privilege.