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What California Restaurant Owners Should Know About Gratuity

F. Michael Ayaz

It takes courage, knowledge and sweat equity to open and run a restaurant. Whether it’s understanding consumer demands, gaining capital, crafting the perfect menu or hiring the right employees, achieving success can be a constant uphill battle. It’s no wonder why 60% of new restaurants fail in their first year of operation.

Labor costs can be expensive, but restaurant workers are necessary when it comes to producing quality meals and engaging diners. Because of this, it’s important to make sure food staff are compensated properly, and that restaurant owners follow California’s tip and gratuity laws.

How employee wages factor into tips

California’s wage requirements for tipped workers depend on how many employees the business has. According to state law, employers in California with 25 or less employees can pay tipped workers a minimum of $11 per hour. For businesses with 26 or more employees, the employer can pay tipped workers $12 per hour, California’s minimum wage.

Employer gratuity rules in California

Here’s what restaurant owners and managers need to know:

  • It is illegal for employers to deduct credit card processing fees from employee tips.
  • Tips cannot be considered part of overtime pay as they are considered voluntary donations from the customer.
  • An employer cannot deduct tips from employee paychecks.
  • Employers cannot use employee tips as credits towards paying the state minimum wage.
  • Waitstaff are required to share their tips with other employees, including dishwashers and bartenders if they work in a large restaurant.
  • Restaurant owners and managers cannot collect tips from their staff.

Proper compensation is important

Understanding California’s gratuity rules can help restaurants run smoothly and boost staff morale. If you are a restaurant owner and have concerns regarding tips and gratuity, an experienced employment law attorney can answer your questions and help you avoid potential litigation.

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