CalTips

CalTips refers to a system for managing and processing tip income for employees in California. This system is designed to comply with California labor laws, which have specific regulations regarding tip pooling, tip credits, and the distribution of gratuities. Employers in California must adhere to these rules to ensure fair compensation for their tipped employees.

A key aspect of CalTips is the distinction between tip credits and tip pooling. A tip credit allows an employer to pay tipped employees a lower hourly wage, provided that the tips they receive, combined with the lower wage, meet or exceed the state minimum wage. However, California law has largely eliminated the ability for employers to take a tip credit for most tipped employees. This means that employers must pay the full state minimum wage regardless of tip income.

Tip pooling, on the other hand, involves employees sharing a portion of their tips with other staff members, such as bussers, dishwashers, or hosts. California law permits tip pooling arrangements, but with strict guidelines. Generally, only employees who directly provide customer service can participate in a tip pool. Managers and supervisors are typically excluded from participating in tip pools. The distribution of tips within a pool must also be reasonable and can be based on factors like hours worked or job responsibilities.

Employers are required to clearly communicate their tip pooling policies to employees, often in writing. They must also maintain accurate records of tip income and distributions. Failure to comply with these regulations can result in penalties and back pay claims. The CalTips system, therefore, encompasses the understanding and implementation of these legal requirements to manage employee gratuities appropriately within the state of California.