Can your employer adjust tips to account for credit card fees?

Frank S. Clowney III

These days, it feels like almost everyone pays for their meal with a credit card. That has not eliminated tipping, but it means that the tip gets tacked onto the bill and run through the card. Yes, people do still leave cash on the table in some cases, but it’s far less common than it used to be.

When employers take credit card payments, they have to pay the fees that go along with those cards. That’s why you sometimes have restaurants where they only accept cash. They don’t want to pay the fees, as it comes right out of the bill on their end.

What some employers have been accused of doing is deducting the credit card fee from the tip. By their logic, the employee is getting the tip on the card, not in cash, so that tip is “costing” the employer money. They deduct the fee from the total amount left for the tip and only give the employee the remainder.

If this has happened to you, it is important to know that it is illegal. It breaks California’s worker’s rights laws. Employers have to give 100% of the tips indicated to the employees to whom they were left. They cannot take the entire tip and claim it is for the establishment. They cannot take the credit card fee off of the tip before giving it to the employee. There is no situation in which they can take all or even a portion of the tip, even if they have some explanation for doing so.

Unfortunately, this type of thing does still happen, and it’s critical for employees to know what steps to take.