The service industry in California constantly grapples with the complexities surrounding tips, tip pooling, and mandatory service charges. Recently, on August 23, 2024, a federal appeals court blocked the Department of Labor’s (DOL) controversial 80/20/30 rule in Restaurant Law Center, Texas Restaurant Association v. United State Dept. of Labor. This rule, which created significant
Ensuring timely payment of wages is a crucial responsibility for California employers. Following our recent discussion on final pay for employees, several readers raised further questions about wage payment schedules and the handling of tips. In response, this Friday’s Five highlights key reminders about employers’ obligations to timely pay wages and tips under California
An issue that constantly plagues the service industry is what to do about tips and the challenges that come with mandated tip pooling and mandatory service charges. We still routinely counsel restaurant clients on the intricacies regarding tips, mandatory tip pools, and service charges. This simple concept, which should be relatively easy, becomes complex under
By Pooja Patel and Anthony Zaller
An issue that constantly plagues the service industry is what to do about tips and the challenges that come with mandated tip pooling and mandatory service charges. This week’s post is an update and a general discussion about tipping and mandatory service charges. This simple concept is surprisingly complex
In O’Grady v. Merchant Exchange Productions, Inc., the California Court of Appeals held that a mandatory service charge could potentially be found to be a gratuity that must be distributed to service employees. The issue in the case is whether a “service charge” can be a “gratuity” that Labor Code section 351 requires to
Plaintiff Jacob Davis brought a putative class action against International Coffee and Tea, LLC (the company that operates Coffee Bean and Tea Leaf) alleging that the company’s tip pooling policy violated California’s Labor Code section 351. The trial court sustained Coffee Bean’s demurrer to plaintiff’s second amended complaint without leave to amend. Plaintiff appealed the
In a huge development in the last couple of weeks, a change in federal law now permits California employers to include back of the house employees in tip pools. This week’s post is an update and a general discussion about issues facing restaurants, hotels, and other industries where tipping and gratuities are left for
This week, a federal court in northern California certified portions of a class action 
brought by Uber drivers who worked in California since 2009 (click here for the decision [PDF]). Over 160,000 drivers have worked for Uber in California during this time period, and while the case is making a lot of news,
1) Gratuities
All tips are the emp
loyee’s property, and cannot be taken by the employer. Labor Code section 350 states unequivocally that “Every gratuity is hereby declared to be the sole property of the employee or employees for whom it was paid, given or left for.” In addition, Labor Code section 351 clearly states
Today’s Friday’s Five provides a few points for employers to consider who have employees that 
receive gratuities. California law is very specific regarding gratuities left for employees, and since tips are property of the employee, employers must approach this area with caution. Here are five “tips” about tips in California.
1. Tips are employee’s property.