Gratuities under the California Labor Code

California’s Labor Code, in Article 1 of Chapter 3 of Part 1 of Division 2, sets forth several laws related to gratuities. Article 1 was enacted in 1937 by Chapter 90. Section 350 defines the terms “employer,” “employee,” “employing,” “agent,” “gratuity,” and “business.”

Section 351 prohibits an employer or agent of the employer from collecting or receiving any gratuity or a part of a gratuity that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part of a gratuity against and as a part of the wages due the employee from the employer.

In addition, an employer that permits patrons to pay gratuities by credit card is required to pay the employees the full amount of the gratuity that the patron indicated on the credit card slip, without any deductions for any credit card payment processing fees or costs that may be charged to the employer by the credit card company.

Section 353 requires every employer to keep accurate records of all gratuities received by the employer, whether received directly from the employee or indirectly by means of deductions from the wages of the employee or otherwise.

Section 354 states that any employer who violates any provision of this article is guilty of a misdemeanor, punishable by a fine not exceeding $1,000 or by imprisonment for not exceeding 60 days, or both. Section 355 requires the Department of Industrial Relations to enforce the provisions of this article. And, all fines collected under this article are to be paid into the State treasury and credited to the general fund.

Section 356 is a statement of the Legislature that it “declares that the purpose of this article is to prevent fraud upon the public in connection with the practice of tipping and declares that this article is passed for a public reason and cannot be contravened by a private agreement. As a part of the social public policy of this State, this article is binding upon all departments of the State.”