Legislative Update: Enforcement of Tips and Gratuities (SB 648)
This is the time of year when we begin to see the California Governor sign a variety of bills that have made their way to his desk. In a recent July passage, Governor Gavin Newsom signed Senate Bill (SB) 648 amending Labor Code section 351 to authorize the Labor Commissioner to investigate and issue a citation or file a civil action to recover gratuities taken or withheld from workers in violation of existing law.
Employers, let’s take a closer look.
What is a gratuity? Labor Code section 350 defines “gratuity” to include any tip, gratuity, money, or part thereof that has been paid or given to or left for an employee by a patron of a business over and above the actual amount due the business for services rendered or for goods, food, drink, or articles sold or served to the patron. Any amounts paid directly by a patron to a dancer employed by an employer subject to Industrial Welfare Commission Order No. 5 or 10 shall be deemed a gratuity.
Existing California law:
Existing law creates the Department of Industrial Relations, and establishes within the department the Division of Labor Standards Enforcement (DLSE), which is headed by the Labor Commissioner. The DLSE is generally charged with enforcing employment statutes and regulations, either in administrative actions or through litigation. Existing law imposes various administrative sanctions, civil fines and penalties, and criminal penalties for violations of employment statutes or regulations.
Existing law prohibits an employer or agent from collecting, taking, or receiving any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deducting any amount from wages due an employee on account of a gratuity, or requiring an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer, and requires the Department of Industrial Relations to enforce these provisions.
What does the new law do?
As noted above, “gratuity” includes any tip, gratuity, money, or part thereof that has been paid, given to, or left for an employee by a patron of a business over and above the actual amount due to the business for services rendered or for goods, food, drink, or articles sold or served to patrons. Employers are prohibited from taking the tips (or any part thereof) or deducting money from wages because of tips earned. It is also illegal for employers to credit tips against wages owed by the employer. Unlike under federal regulations, in California an employer cannot use an employee's tips as a credit towards its obligation to pay the minimum wage. California law requires that employees receive the minimum wage plus any tips left for them by patrons of the employer's business.
Employees whose employer has kept or credited tips against wages can either file a wage claim with the DLSE or file a lawsuit in court against the employer to recover lost wages. Although existing law directs the Department of Industrial Relations to enforce the provisions of existing law regarding gratuities, the Labor Commissioner lacks citation authority to recover gratuities taken or withheld from workers. The only option available to the Labor Commissioner to recover stolen gratuities is through filing of an action in court. Given the limited resources available at the Labor Commissioner’s office, granting the Labor Commissioner the ability to issue citations to recover owed gratuities enhances efficiency and streamlines limited resources. SB 648 authorizes the Labor Commissioner to investigate and issue a citation or file a civil action for gratuities taken or withheld in violation of existing law.
According to proponents, “For these low-wage workers—often in the restaurant or hospitality industry—stolen tips could be money for rent or food for the week. For the many law-abiding businesses who follow the rules, this unfair competition could put them out of business. This bill…levels the playing field for law abiding employers. ...
Employer takeaways:
If your workplace is one where gratuities are involved, you should take note of the above definition of what constitutes a gratuity and ensure that workers are receiving the moneys left for them. Now that the Labor Commissioner can issue citations with ease rather than having to file a court action, employers should strive to avoid scenarios where workers are mistakenly prevented from receiving their gratuities.
If you have questions about any new 2025 legislation that may impact your business, please give Rosasco Law Group a call. We can best handle your workplace’s compliance with existing and new laws to ensure a smooth business operation for you so that you can focus on your clients’ and employees’ needs first.
