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Can your employer withhold part of your tips?

Employees who are given cash tips often don’t have much trouble collecting them promptly and without issue, especially if the tips are just left on tables for the specific employees, rather than put into centralized tip jars. However, customers are paying with credit cards more and more often in the modern day. These do have lines where tips can be written in, but they change the collection process.

It’s important to note that employers can’t withhold these tips. They need to be paid promptly, which typically means that they should be included in the employee’s next paycheck. That could be as much as two weeks after the payment date, but should rarely exceed that. Employers can’t hold tips back indefinitely in order to increase revenue, perhaps while promising to pay later. This would exploit employees by using their personal earnings for the company.

With credit cards, there is also often a processing fee that has to be paid by the company when the card is run. Under Labor Code Section 351, which governs tips in the state of California, companies cannot take these fees out of the tips.

Finally, tips are earnings that go on top of wages. Employers are not allowed to withhold the money that an employee earned in standard wages, saying that the tips count instead. The tips are to be paid out in addition to those wages, not instead of them.

Most employers understand Labor Code Section 351 and comply with it, but there are situations in which they violate the law. If this happens to you, it can be very frustrating, cutting into your lawful earnings, and you need to know what legal options you have.

Source: Department of Industrial Relations, “Tips and gratuities,” accessed Sep. 20, 2016

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