Effective July 30, 2025, California enacted Senate Bill 648, amending Labor Code Section 351 to further clarify and strengthen employee protections related to gratuities. The law reinforces that all tips paid, given to, or left for employees by patrons are the sole property of the employee and cannot be taken or shared by the employer or any agent of the employer.
The revised statute also addresses credit card transactions. If a customer leaves a tip using a credit card, the employer must pay the full tip amount to the employee without deducting any portion to cover credit card processing fees. These tips must be paid to the employee no later than the next regular payday following the transaction.
Employers in industries where tipping is common, such as hospitality, food service, and personal care, should take this opportunity to review internal policies and payroll practices to ensure compliance. Tip amounts must be processed and paid in full, and no portion may be retained or used to supplement base wages.
Starting January 1, 2026, the Labor Commissioner will be able to investigate violations and issue fines, using the same process already used for handling wage and hour complaints.
Next Steps for Employers
To ensure compliance, employers with tipped workers should review their current practices to confirm that tips are neither retained nor reduced. Payroll systems should be audited to verify that all gratuities, including those paid by credit card, are processed in full and paid to employees on time. Employers should also review any written policies related to gratuities and provide training to managers and payroll staff on the proper handling of tipped income.
