Should the employer deduct credit card processing fees from my tips?
Any credit card charges (processing fee) are considered as the employer’s responsibility. It’s also the responsibility of the employer to keep all the record of the tips you receive. Violation of this law is considered a misdemeanor. If your employer has been crediting the tips against your wages, you’re being underpaid.

Is tip pooling legal?
Yes. Tip pooling refers to the collection of all the tips from employees and then splitting them according to the agreed percentages. In California, this is considered legal so long as the previously agreed conditions are met. A general rule of thumb is that the tips included in the pool should be given to the employees only. Supervisors and managers should not share in the tip of the pool. The law also requires that the servers should get the lion’s share with a smaller portion going to busboys and bartenders.

What are the legal consequences of the violations?
Employees who don’t receive their tips are required by law to bring to their employer’s attention their outstanding tips and gratuities. Any employer who violates the California Laws on dispersing tips and gratuities is considered to have committed a misdemeanor. Therefore, you should file a claim at the labor commissioner’s office to recover any wages or tips that are being illegally withheld. Alternatively, you can seek the services of UELG (united employee law group) to file a lawsuit against your employer. And the best part is that an employee cannot be punished for exercising these rights.

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A tip refers to money voluntarily left by a satisfied customer for an employee for the goods or services rendered. Under California law, employees are entitled to keep their tips and gratuities left by customers. And because tips are not technically a wage, the employer cannot take any part of the tip. Additionally, they should not be included when calculating the employee’s hourly rate. It’s also worth noting that the employee cannot be forced to share the tips with managers, supervisors or other employees. Here are a few rules you should know about California Laws on
dispersing tips and gratuities.

Are tips used to calculate overtime and regular rate of pay?

Tips are not part of an employee wage and should not be included in the calculation of the regular rate of pay. According to California labor laws, they must be paid immediately as they are received without any interference from the employer. And if the customer pays the tip via credit card, the employee is entitled to it on the next regular payday the credit card payment is authorized. Because the law is committed to upholding labor laws, the employee must receive the minimum wage regardless of the tips received.

Should the employer deduct credit card processing fees from my tips?

Any credit card charges (processing fee) are considered as the employer’s responsibility. It’s also the responsibility of the employer to keep all the record of the tips you receive. Violation of this law is considered a misdemeanor. If your employer has been crediting the tips against your wages, you’re being underpaid.

Is tip pooling legal?

Yes. Tip pooling refers to the collection of all the tips from employees and then splitting them according to the agreed percentages. In California, this is considered legal so long as the previously agreed conditions are met. A general rule of thumb is that the tips included in the pool should be given to the employees only. Supervisors and managers should not share in the tip of the pool. The law also requires that the servers should get the lion’s share with a smaller portion going to busboys and bartenders.

What are the legal consequences of the violations?

Employees who don’t receive their tips are required by law to bring to their employer’s attention their outstanding tips and gratuities. Any employer who violates the California Laws on dispersing tips and gratuities is considered to have committed a misdemeanor. Therefore, you should file a claim at the labor commissioner’s office to recover any wages or tips that are being illegally withheld. Alternatively, you can seek the services of UELG (united employee law group) to file a lawsuit against your employer. And the best part is that an employee cannot be punished for exercising these rights.

Photo Credit: Shutterstock/maradon-333

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Giving employees a tip is a well-accepted and legal practice in the business environment. Both the federal and the California laws have long recognized that the tips and gratuities left by satisfied customers after a service should sorely be in favor of the employee. Even though this law is well established, some employees in the hospitality industry and other business sectors still fall victim to the tip and gratuity theft. Below are some important tipping standards and laws governing gratuities in the state of California. Read on to get started.

Gratuities and Tips 

Wages and gratuities are two different set of rewards for the employees. Tips are not legally considered as a part of the wages and are not included in the regular rate of pay when calculating the employee’s unpaid overtime.

Under the federal & California-law, employers cannot take part or all of the tip given to the employee. Unlike other states, the California law doesn’t also allow the business owner to take tip-credits from the employee even if the tips exceeds the minimum wages to be paid.

Tip Pooling

This is a term used to describe the practice where employees collect their tips before they are re-distributed among the workers. Tip pooling, is, however, limited to employees regarded to be in a chain of service. The latter include services offered by bartenders, and hosts. Employees serving as cooks, cashiers or dishwashers are not part of the chain-of-service, hence tip pooling doesn’t apply. Tip pooling also follows a fair system where each employee is paid out in a reasonable proportion depending on the number of services offered. In a classical restaurant setting, the DLSE agency has formulated a fair distribution plan that sees waiters take 80%, buses-15%, and bartenders the remaining 5%. The question of whether this kind of distribution is fair or not depends majorly on the business set up and its level of performance.

When to Call it a Tip

When the tipping is voluntary and a satisfied customer pays directly in cash, then that is obvious. The employer, may however, choose to impose a mandatory-service-charge and the tip is not guaranteed. If the payments plus the tip is made with credit card; the rules might slightly change.

Mandatory Service Charges

For the case of large tables, catered events and private parties, the restaurant may impose a mandatory-service-charge on the bills. Under the California and federal law, payments made on such occasion is not considered a tip and the employer has the right to keep all the “service charge”. Most employers out of good will decide to pay some amount to the employees as a tip. Doing so, however, incur the employer some tax burdens and administrative cost.

Under California law, when the tip is paid with credit-card; the tip should be paid in full to the employee, regardless of the processing fee.

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What are tips and gratuities?

Tips and gratuities essentially mean the same thing. In their basic definition, they are used to refer to money voluntarily left for an employee of a business that is more than exceeds the set amount owed for the sale of goods and services.

Gratuities and tips are given as a reward for excellent services and ranges from few cents to the large amount that customers are willing to give. The tradition of giving tips is an accepted practice that has been there for quite long.

How does California law protect tipped employees?

The California law and courts have for long acknowledged that for a customer voluntarily leaving behind tips is a reward for the service provided and thus employers have no right to withhold the amounts due whatsoever.

Under the Californian labor laws, code 351 prohibits employers or their agents from withholding or keeping any tip or gratuity willingly given to an employee. The laws go ahead to state that tips and gratuities are sole properties of the employee or employees and in the regard, none has the right to withhold them back whatever the reason.

Tips and gratuities are very common in the hospitality industry if you work in this industry the California law protects your interest in regard to tips and gratuities. For instance, the law does not allow a tip credit. Section of 351 of the labor code expressly prohibits employers from crediting any tip or gratuity against the wages due for an employee.

As stated before, the law defines tips and gratuities as sole properties of an employee or employees, so for all employers covered under this law are required to pay tipped employees their full wages regardless of the amount they earn from tips. Any employee who credits tips and gratuities to meet the minimum wage requirements are violating the law and as an employee, you need to take action against such violations.

The law also allows employees covered under this law to impose a mandatory tip/gratuity policy. According to Californian labor laws, a tip left behind by a customer belongs to all employees who directly make contributions to the delivery of service to the customer(s).

Additional Information

The employees can also, for instance, agree among themselves to share or pool tips or come up with any policy regarding the tips since they belong to all the employees. The law, however, exempts floor managers in charge of firing and hiring of employees from partaking in any tip and gratuity policing.

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Employees are essential to any organization or company, but without fair pay, no one would stick around very long. If you have employees in your business or company, you should ensure that you pay them well, especially the ones that you want to stick around.

In addition, you should ensure that they have good working conditions. Good remuneration is one of the motivating factors that can make employees perform better in the workplace.

However, there are circumstances where employees are normally discriminated due to their races. This leads to a race-based disparity in pay. This is detrimental. This can actually make an employee lose morale in his or her job. However, in California, Fair Pay Act came to mitigate this problem.

What is Fair Pay?

You will note that employees who perform similar work under similar working conditions should be paid equally. However, there are instances where the employees who work under the same conditions can be paid differently.

In this case, the employee should be able to manifest that the wage differential is based on either of the following; senior system, merit system and so forth. He or she should also show that he or she gets more salary not as a result of sex or race but due to factors such as education or experience.

You will note that this law requires that each factor is relied on. Each factor should account for the entire wage differential. This is one way of reducing discrimination in the workplace. As we move towards the future, employees will need to be paid for the position he or she is worth.

However, if the same employee has extra skills and competencies that can help the company or the organization, he or she can get a higher salary. The burden of paying employees falls on the employer.

The employer should check these factors so that he or she can pay the employees what they deserve. If you promote fairness in your workplace, your employees will be encouraged to work. In addition, their morale will increase. This goes a long way in improving their productivity.

What the Fair Pay Act Does

The Fair Pay Act basically calls for an overhaul of hiring practices of HR professionals who work in California. These professionals should check the credentials of the job applicants and then reward them accordingly.

This can do a long way in reducing race-based disparities in pay. Earlier on, job applicants used to negotiate for their salaries with their employers. However, times have changed. This Act has enabled most employees to get a fair pay for their services. This can be very beneficial to your company or business in California.

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While your employer denies paying your rightful amount, immediately consult the unpaid wages attorney of your area. He will help you to get back the amount; your employer did not pay you. The unpaid wages attorney can help you to recover your:
-Earned bonus and promised bonus
-Vacation
-Earned wages
-Salary and
-Commissions

There are several situations when an employer violates the law and stops paying an employee:
Simply withholds your payment
Several times the employers disagree to adhere to the payment policies of the written employment contract. They try to cheat the employers in this way. You have all right to contact the unpaid wages attorney in such a situation. He can help you to revive your wage, following the legal procedure.

Denies making your final payment
When you leave a company, an employer can refuse to pay your last moth fees. He can continuously delay paying off your rightful amount over and over again. Do not ignore the situation. Immediately seek help from the unpaid wages attorney. He can help you to get back your payment at the earliest.

Refuse to pay your overtime fees
Often the employees are given huge work pressure, and the employers do not bother to pay them extra. At the time of making payments, they offer usual wage amount to the employees, deducing the extra amount. The unpaid attorney can help you to come out of the situation.

Does not pay in the proper time
It is often common in the industry that the employers delay in paying the employees. The employees have the notion that, they have every right to use their employers to the optimum level. In reality, it is not always true. You can expect to get your hard earned money at the correct time. Consult the unpaid wages attorney if required.

Employment contracts are always legal. Both the employee and the employer should adhere to this strictly. If an employee agrees to work for a period at a particular wage, the employee should pay the proper amount to his employee. Whenever the employer fails to pay his employee, it is known as “unpaid wage.” You can always take legal action against an employer. Approach an unpaid wages attorney and take legal action against your employer. Whether you are a non-exempt employee or a contracted or exempt, all types of employees are protected by US Employment Laws.

Before you decide to consult an attorney, remember to collect all your papers and make a detailed list of all the hours worked in each and every week in which you have a claim you are entitled to an overtime pay.

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California recently made a significant change with its labor laws, specifically about piece-rate compensation. If you are an employer that pays your employees by a piece-rate system, then you should know about this recent change. Otherwise, you could be unknowingly underpaying your employees, which can easily lead to an expensive lawsuit for you.

On the other hand, if you are an employee, then knowing about this recent change entitles you to proper compensation set by California’s labor code.

What Is It?

In some industries, it’s common for employers to pay their employees by “piece-rate” system. If an employee is on a piece-rate system, he/she gets paid for every completed task or per the number of produced units.

Common Examples:

* Carpenters that are paid by the yard
* Technicians that are compensated based on the number of units installed
* Nurses that are paid based on the number of procedures done
* Factory workers that are paid on the basis of the number of widgets he/she can produce

When practiced correctly, the piece-rate system encourages increased productivity, which is good for the employer. Employees also get the benefit of having the opportunity to earn more compared to a fixed hourly rate system.

The New Piece-Rate Compensation

California’s new piece-rate compensation is also known as the AB 1513. It went to effect last January 1, 2016. Under this recent change, California piece-rate employees must be compensated for non-productive time on top of what they are getting from the piece-rate compensation.

The additional compensation is determined by dividing the worker’s total compensation for the workweek by the number of hours worked during the same workweek. Calculations can easily get confusing, and that’s why it’s best that you consult with a professional to avoid costly problems.

Are There Any Exceptions?

Some employees may be exempt from this new change. One good example is when the employee is being paid on a commission basis. Before a compensation can be considered as a “commission basis,” the pay must be on a percentage basis in relation to the sale price.

While the employers have control on the design of the piece-rate compensation, it is not possible for the employer to opt-out from paying compensation for non-productive time. The compensation for non-productive time is based on the average hourly rate. Also, piece-rate employees must be paid for overtime. The technical details of the new change can easily get confusing, and it’s best that you consult with the appropriate professional as soon as possible.

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There are several things you should know about reporting time pay in California. The law in California has different sections which are aimed at protecting the right of employees. There are different sections where the law protects you as an employee from different forms of exploitation.

Things you need to know about Reporting time pay in California

1. What is reporting time pay?

Some employees will call workers but the work can end up being assigned less than the normal work day work, in such a case, the employee will be paid for reporting to work. The law requires the employer to pay the worker for the time he worked and the rest of the hours will be paid under reporting wage rate. For example, if an employee will report to work and work for an hour instead of four hours, the employer will pay him on regular rates for the one hour worked and pay him based on reporting wage for the next three hours. If an employee reports to work and does not work at all, then the employer is obliged to pay for two hours based on waiting time.

2. Time paid as reporting time pay does not trigger overtime pay.

If an employer will be paid waiting time and the amount exceeds the normal pay rate, then the employer does not have to count the excess overtime. The law prohibits the act to avoid expatiation on employees.

3. Reporting time pay and meetings.

If the employer reports to work and he works for half the time he was supposed to work, then the employer can pay for the only time worked. There is debate on the amount the employee can be paid if he is called for a meeting during his work day and he was not on duty. But in normal cases the employee is paid two hours of normal work day as reporting time.

4. Exceptions to the reporting time requirements.

There are circumstances where employers are not entitled to reporting time payment. They include the following incidences:

When operation cannot begin due to threats to employer’s property, when civil authorities recommend for the work not to start

When public utilities fail to supply power or other amenities required for the running of the operations.

When acts of God such as earthquake cause an interruption which is beyond employers control.

5. What if the employee voluntarily leaves early?

If an employee leaves work early due to personal or other needs, the employer is not entitled to pay for the reporting wage.

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If your employer has broken any federal law or state law in California, then you are eligible to file a wage claim against him or her. In California, generally wage claims are filed in case the employer fails to provide the minimum wage or fails to provide overtime or meal expenses. If you want to file a wage claim against your employer, then you need to fill out several forms. First, you will have to fill Form 1 and then submit it to the DLSE office. In this form, you will be asked about your current employer, your work hours and the reason behind filing the claim. Depending on the reason, you may have to file several other forms like:

i) In case you are filing a claim due to unreasonable work schedule, then you need to fill form No 55.

ii) If your employer has failed to pay you commission, then you need to fill Form 155.

Filling these forms can be quite tricky. If you make any mistakes, then your claim may get rejected. Hence, it is advisable to ask a lawyer to review your forms. United Employees Law Group can help you out in this regard.

Documents required: Along with the form, DLSE may also ask you to submit some documents like:

1. Time records: They may ask you to submit some proof showing the number of hours and days you have worked over there. In case your office maintains a journal, then you can submit a copy of it as proof.

2. Payslips: You may also have to submit payslips to show how much wage you were getting paid. For cases related to unpaid wages, they are very important.

3. Bounced check: In case checks from your employer have bounced, then you need to submit a copy of those checks.

4. Notice of Employment: You may also have to submit the notice of employment, where your name, wage rate and address are mentioned.

The DLSE will also ask your employer to send all these documents. Hence, even if you have lost them, you don’t have to worry.

Time Limit: In case of most violations like failure to pay minimum wage or overtime, you have to file the claim within 3 years of the date of violation. However, it is advisable to file the claim as soon as possible. This way, it will be easier for you to get hold of all the latest documents.

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The W-2 tax form is the annual statement issued by the employers to all their employees outlining details of the total income for the year that the employee has earned and the portion of income that has been withheld for the federal tax and other forms of income tax. Employers are required to provide copies of the Form W-2 to the Social Security Administration for the purpose of sharing the data with the Internal Revenue Service.

Workers are required to report all their annual earnings from their job or jobs during a particular year. To help facilitate this process, the IRS commissions all companies to provide their employees with a Form W-2, a Wage and Tax Statement, to enable employees to file their taxes at the end of the year. According to the law, the W-2 tax form must be hand-delivered or mailed to the employee no later than January 31st reporting earnings, salaries, and tips earned in the previous calendar year.

Common Problems Relating to Form W-2

1. Not receiving your Form

If you don’t have the form by mid Feb, you should consult with your employer to know the reason. It is advisable to request for a printed copy of the form to take with you home. Otherwise, if you fail to get the Form W-2 by February 14th, you should contact the IRS for help.

2. How to correct wrong information on your W-2 form

In case you find some information that is wrongly showing on the form, you should request your employer to make the necessary corrections. Employers are given up to March 31, to file the W-2 tax forms with the respective Social Security Administration. During this time, your employer can fix any errors or mistakes in your W-2 form before it is filed with the federal government.

3. Employers refuses to issue you Form W-2

First, you are advised to make efforts and convince the employer. If your efforts to have the form are futile, then you should call the IRS using 1-800-829-1040. The IRS advises that you should have the following information ready:

–The employer’s name and complete address, including zipping code, the employer’s identification number (if known), and telephone number
–Your name and address, including zipping code, Social Security number, and telephone number; and
–An estimate of the wages you earned, the federal income tax withheld, and the dates you began and ended employment.

Employers who fail to remit, pay or report employee salaries are a hot button for the federal agency.

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