Tips are a huge part of income for workers in the service industry, who often earn gratuities by working hard and doing their jobs well. Tipped workers understandably do not take kindly to others dipping into the money they have earned.
California law is clear: tips belong to the worker who earned them. Business owners, managers, and others do not get a cut. Sadly, however, tip theft is alive and well across the Golden State. Employers all too frequently take or misuse gratuities, effectively taking money out of their workers’ pockets. Sometimes the theft is blatant. Other times, it is disguised in illegal “tip pools.”
At Justice Law Corporation, our California wage and hour attorneys help working people in service jobs and across the state fight back to protect their tips – and their rights – on the job. We are seasoned attorneys who have dedicated our careers to assisting people in wage and hour, discrimination, and other cases.
New changes to the law make it easier for tipped workers in California to protect their hard-earned gratuities. It is vital to understand your rights against tip theft and how to fight back. Here is what you need to know.
What is Tip Theft?
Tip theft happens when someone – typically an employer or manager – keeps all or part of the tips that a worker earns on the job. This is a form of theft: tips are strictly the property of the workers who receive them under California state law. That is true regardless of whether the money is left in cash on the table or added to a credit card bill.
In our California wage and hour attorneys’ experience, some of the most common ways that employers steal tips include:
- Keeping a piece of cash for tips
- Withholding credit card tips
- Using tips to cover business costs
- Improperly pooling tips
- Combining tips with wages in ways that underpay workers
Some of these moves may be lawful, depending on the circumstances. However, they often violate workers’ rights.
California Employers Cannot Count Tips for Minimum Wages, Overtime
Federal law and laws in several states allow employers to pay lower hourly rates to tipped workers. The idea is that employers can use expected tips to make up the difference between the legally required minimum wage that workers must be paid and the lower wage employers actually pay.
This is not legal in California. Employers must pay at least the minimum wage, in addition to any tips workers earn. California’s statewide minimum wage went up to $16.90 effective January 1, 2026. That means tipped workers must be paid at least $16.90 per hour, not including any gratuities. Several cities and localities across the state impose higher wage floors.
Tipped workers are generally eligible for overtime pay at 1.5x their normal rates for hours worked over eight hours in a single workday or beyond 40 hours in a single workweek. The overtime rate ratchets up to 2x an employee’s normal rate for time worked over 12 hours in a day, or beyond 8 hours on the 7th consecutive day of work in a workweek.
The Rules for Tip Pools
Tip pools have long been common in restaurants, bars, and other service industry establishments. Employees working behind the same bar may be forced to combine tips earned during their shifts and split them at the end of the night, for example. Or restaurant servers may be required to “tip out” busboys and bartenders.
Tip pools generally are permitted under California law, as long as they meet strict requirements. Pools cannot be used to compensate an owner, manager, or supervisor. That is true, even if the person is providing direct table service to patrons.
Only workers who regularly and customarily receive tips can share in a pool. The pools can be limited to workers providing direct table service or include those in the chain of service.
How to Fight Back Against Tip Theft
A new law in California makes it easier for workers to recover tips stolen by their employers.
Senate Bill 648 took effect on January 1, 2026, after being signed into law by Gov. Gavin Newsom last year. The law empowers the California Labor Commissioner to investigate tip theft claims and issue fines against employers for violations.
SB 648 also strengthens workers’ rights with respect to tips paid by credit card. It requires employers to pass on the full amount of the tip, without any deductions for credit card processing fees or other costs. Employers also must pay those gratuities by the next regular payday.
Anyone who has been victimized by tip theft in California can file a claim with the Labor Commissioner. They can also pursue a lawsuit in court to recover the tips, as well as interest, additional damages, and attorneys’ fees.
Tip theft often does not happen in a vacuum. In many situations, employers who steal tips do so through policies and practices that affect large groups of workers. Employees in these situations can join together to fight back by filing a class action. This option gives tipped workers leverage against large employers that they would not otherwise have by allowing them to file individual claims.
Knowing your rights is the first step in protecting your tips. It is also important to understand your employer’s policy regarding gratuities and to document specific situations in which you believe you have been shortchanged.
Our California Wage and Hour Attorneys Can Help
If you believe that your employer is stealing your tips or violating your rights on the job, you do not need to go it alone. A California wage and hour attorney at Justice Law Corporation can help you evaluate your claim and understand your rights and options. Our office is conveniently located in Pasadena. Contact us at (818) 230-7502 to schedule a free consultation with a California wage and hour attorney.
