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EMPLOYEES FIRST LABOR LAW

Wage & Hour Violations

Labor Code §351 – Tips Belong to Workers

Labor Code 351 makes tips the property of the workers they were left for.

Reviewed by Jonathan P. LaCour, Esq. CEO · Senior Trial Counsel

Updated 7 min read

In this guide12 sections
  1. What Labor Code 351 says
  2. Key definitions in Labor Code 350
  3. Who section 351 covers
  4. What your employer can’t do with your tips
  5. Tip pools and service charges
  6. Penalties and remedies
  7. Deadlines
  8. Related sections
  9. How it plays out
  10. What to do if your tips were taken
  11. Frequently asked questions
  12. Sources

California Labor Code section 351 says tips belong to the employees they were left for: your employer and its managers can’t take any part of them, can’t cut your wages because you get them, and can’t count them toward your pay. Tips paid by credit card must reach you in full, with no deduction for card processing fees, by the next regular payday.

Since January 1, 2026, the Labor Commissioner can also investigate tip theft and issue citations or file civil actions against employers who take or withhold tips. That authority was added by SB 648 (Statutes of 2025, chapter 93).

This page explains the statute. For how tip pools are supposed to be set up and split, see our guide to tip pooling rules in California.

Key takeaways
  • Under Labor Code 351, a tip is the sole property of the employee it was left for; employers and their agents can’t take any part of it.
  • Your employer can’t share in your tips, and neither can managers or supervisors who can hire, fire or direct your work: they count as agents (Labor Code 350).
  • Card tips must be paid in full, with no processing-fee deduction, by the next regular payday after the customer paid.
  • California has no tip credit: tips can’t be counted toward your wages, so you get at least minimum wage plus tips.
  • Since January 1, 2026, the Labor Commissioner can investigate tip theft and issue citations or sue (Labor Code 351(b), SB 648).

What Labor Code 351 says

PartWhat it says (paraphrased)
(a), first rule“No employer or agent shall collect, take, or receive any gratuity or a part thereof” left for an employee by a patron.
(a), wagesAn employer can’t deduct any amount from wages because of a tip, and can’t require you to credit tips against the wages it owes you.
(a), ownershipA tip is the sole property of the employee or employees it was paid, given or left for.
(a), credit cardsIf customers can tip by card, the employer must pay you the full tip shown, without deducting processing fees, “not later than the next regular payday following the date the patron authorized the credit card payment.”
(b)Added effective January 1, 2026. The Labor Commissioner may investigate tips taken or withheld in violation of the section and issue a citation or file a civil action. Citations follow the procedures in Labor Code 1197.1, “as appropriate.”
California employers may not deduct credit card processing fees from employee tips under Labor Code 351

Key definitions in Labor Code 350

  • Gratuity: any tip or money a customer pays or leaves for an employee beyond what the customer owes for the goods or services. Amounts paid directly by a customer to a dancer employed under IWC Wage Order 5 or 10 count as gratuities.
  • Agent: “every person other than the employer having the authority to hire or discharge any employee” or to supervise, direct or control employees’ work. In practice this means managers and supervisors.
  • Employer: anyone running a business in California with one or more people working for it, including concessionaires.
  • Employee: anyone, including minors, who actually performs service in the business, however they are paid.

Who section 351 covers

Section 351 protects any employee who receives tips, no matter the industry or the size of the business. Restaurant servers, bussers, bartenders, baristas, hotel housekeepers, bell staff, valets, salon and spa workers, and casino dealers are common examples. The rule applies to any gratuity, whether it is left in cash or added to a card.

The restrictions fall on the employer and its agents. An owner can’t pocket a tip, and neither can a manager or supervisor with authority to hire, fire or direct your work.

Is your employer or manager taking a cut of your tips?

Shift reports, card receipts and pay stubs usually show where tips went. We can review them with you and explain your options under section 351 and related laws.

What your employer can’t do with your tips

  • Keep any part of a tip, or let an owner, manager or supervisor share in it.
  • Count tips toward the minimum wage. California has no “tip credit,” so you must receive at least the full minimum wage plus your tips.
  • Deduct credit card processing fees from card tips.
  • Hold card tips past the next regular payday after the customer paid.
  • Reduce your wages because you earn tips, or require you to treat tips as part of your wages.

The Labor Commissioner adds that because tips are given voluntarily by customers, they are not part of your regular rate of pay for overtime purposes.


Tip pools and service charges

Section 351 doesn’t mention tip pools. The Labor Commissioner says employers may require a tip pool if it is “fair and reasonable,” limited to employees who provide direct service or are in the “chain of service” for the customer, and never used to pay owners, managers or supervisors, even if they also serve tables. Our tip pooling guide covers who can be included and how shares are set.

Mandatory “service charges” are a gray area. The Labor Commissioner says a service charge may or may not be a gratuity, depending on whether customers understood and intended it as a tip, how contracts describe it, and industry custom.

Labor Commissioner citation power for tip theft effective January 1, 2026 under Labor Code 351(b)

Penalties and remedies

  • Labor Commissioner citations (from January 1, 2026): under section 351(b), the Labor Commissioner can cite an employer for tips taken or withheld, using the citation procedures in Labor Code 1197.1, or file a civil action.
  • Wage claim: the Labor Commissioner says you can file a wage claim for tips, or go to court, subject to the limit on direct lawsuits described below. If tips were credited against your wages and you have left the job, you may also claim waiting time penalties under Labor Code 203.
  • Minimum wage claims: if tips were used to cover part of your wage, the shortfall is unpaid minimum wage, which you can recover with interest and attorney’s fees under Labor Code 1194, plus liquidated damages under Labor Code 1194.2.
  • Criminal penalty: under Labor Code 354, a violation of the tip article is a misdemeanor punishable by a fine of up to $1,000, up to 60 days in jail, or both.
  • Recordkeeping: Labor Code 353 requires employers to keep accurate records of all tips they receive, open to inspection by the state.

One limit: in Lu v. Hawaiian Gardens Casino, Inc. (2010) 50 Cal.4th 592, the California Supreme Court held that section 351 does not, on its own, create a private right to sue. The court added that its holding “does not necessarily foreclose the availability of other remedies,” and pointed to a common law claim for conversion as one example. It expressly left open whether tip pooling is allowed under section 351. Because of this limit, tip claims are usually brought through the Labor Commissioner or under other laws, which is why the new citation power in subdivision (b) matters.


Deadlines

ClaimGeneral deadlineSource
Wage claim for tips or unpaid wages based on a statuteGenerally 3 yearsCode Civ. Proc. 338(a)
Retaliation complaint with the Labor Commissioner (for example, after complaining about tip theft)1 year after the retaliation; can be extended for good causeLabor Code 98.7
Contesting a citation (employer)15 business days after serviceLabor Code 1197.1(c)

The right deadline depends on how the claim is brought, so get advice early.


SectionWhat it adds
Labor Code 350Definitions of employer, employee, agent and gratuity
Labor Code 353Employers must keep records of tips received
Labor Code 354Misdemeanor penalty
Labor Code 356The tip article exists to prevent fraud on the public in connection with tipping
Labor Code 1197.1Citation procedures the Labor Commissioner uses under 351(b)
Labor Code 1194Lawsuits for unpaid minimum wage and overtime
Labor Code 98.6Retaliation for complaining about unpaid wages

How it plays out

💡 Example: Marco, a hypothetical server, receives $1,200 in credit card tips during a two-week pay period in 2026. His restaurant subtracts a 3% card processing fee from those tips before paying him, keeping $1,200 × 0.03 = $36, and pays the rest two paydays later. Both practices violate section 351: Marco is owed the full $1,200, and it was due on the next regular payday after each customer paid. If the restaurant also takes $5 a shift from the tip pool for the floor manager over 20 shifts, that is another $5 × 20 = $100 taken by an agent. Marco can file a wage claim, and since 2026 the Labor Commissioner can also cite the restaurant.


What to do if your tips were taken

  1. Keep your own log of tips by shift: cash, card and pooled amounts.
  2. Compare card tips on your receipts or end-of-shift reports against what shows up on your pay stub, and note when they were paid.
  3. Write down who shares in the tip pool and whether any owner, manager or supervisor receives a cut.
  4. Follow the steps in our tip pooling guide and our post on 2026 tip theft enforcement, and get advice before the deadlines above run.

Frequently asked questions

Can my manager take part of the tip pool?

No. Managers and supervisors who can hire, fire or direct your work are “agents” under Labor Code 350, and the Labor Commissioner says a tip pool can’t be used to pay owners, managers or supervisors, even when they also serve customers.

Can my employer deduct credit card fees from my tips?

No. Section 351 requires the full amount of a card tip, with no deduction for processing fees, paid by the next regular payday after the customer authorized the charge.

Can my employer pay me less than minimum wage because I get tips?

No. Tips can’t be credited against wages in California. You must be paid at least the applicable state or local minimum wage for every hour, plus your tips.

Is a mandatory service charge a tip?

Not always. The Labor Commissioner says it depends on whether customers understood and intended it as a tip, how the contract describes it, and industry custom.

What changed in 2026?

Starting January 1, 2026, section 351(b) lets the Labor Commissioner investigate tips taken or withheld and issue citations or file civil actions, using the citation procedures in Labor Code 1197.1.


Sources


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This article provides general information about California law and is not legal advice for any specific situation. Reading it does not create an attorney-client relationship. Past results do not guarantee a similar outcome.

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