California tipping laws are some of the most unique and complex in the country, setting the state apart from the rest of the U.S. Unlike many states, where tips are primarily governed by federal regulations—including the Fair Labor and Standards Act (FLSA)—California differs from these regulations in a few key ways. They also have some additional state-specific rules regarding wage laws and the way tips can be pooled and distributed among workers. 

These differences are meant to benefit tipped workers, but they can present challenges to business owners. In this article we’ll take a closer look at what makes California so unique in terms of tipping regulations—and what to look for in a solution in order to make tip payouts seamless for you, while still abiding by those state-specific regulations.

California’s Unique Tip Payout Laws

California is known for having some of the strongest tip regulations in the country. While not a comprehensive list of their tip payout regulations, here are a few specific ways California differs from other states when it comes to tipping:

1. Employees can’t be charged a fee to access their tips

‍Here’s a great example of how California tipping laws aim to benefit the worker: you can’t charge California employees a fee to access their tips. This means that certain paycards which promote daily tipouts—but charge a fee to access them—won’t be an acceptable tip payout method in the state of California. There is a workaround, however, if you, their employer, cover the cost of these fees.

2. Strict final paycheck laws

Each state has slightly different “final paycheck laws,” meaning the amount of time an employer has to pay an employee their last check once they separate from the employer. 

California’s final paycheck laws say that if you terminate an employee, or if they resign with 72 hours notice, you must provide their final paycheck immediately, on their final day of work.  If the employee is resigning without notice, you still only have a limited window—72 hours—to provide their final pay. If you’re using outdated methods like paper checks, this may pose a challenge, requiring you to track down an employee after they’ve left to ensure they receive payment. 

3. You cannot deduct credit card fees from tips

While federal tipping regulations allow employers to deduct credit card fees from tips, this isn’t allowed under California labor codes. Instead, your employees must receive the full tip amount, with businesses covering any credit card processing fees. You also must pay out tips left via credit card “no later than the next regular payday” from which they were authorized—underscoring the importance of providing fast tip payouts.

4. Tip credits are against the law

In California, it’s considered illegal to use tips as a “tip credit” toward minimum wage obligations, meaning that tipped workers must be paid the full amount of minimum wage plus any tips. This differs from some states, which allow employers to pay workers less than the minimum wage as long as they earn enough in tips to make up the difference; this is referred to as a “tip credit.”

5. Must provide the option to pay in paper check

Employers in California cannot mandate digital tip payouts; they must provide the option for workers to be paid in paper check if they wish. Some digital tipping solutions require companies to mandate their solution as the only payroll option—which would pose a challenge for California businesses with tipped workers.

Support Your California Workers With Daily Tip Payouts Through Branch

Looking for a paycard solution that won’t charge workers to access their tips? Or a solution that allows you to send fast digital tip payouts to keep you compliant with things like final paycheck laws? With Branch, you can provide a seamless, digital tip payout process that comes with the following benefits:

• No-cost, daily tip payouts. Branch does not charge fees to access tip payouts; there’s no cost to the employer and plenty of fee-free options for your workers. You can push payouts to workers as soon as they complete a shift, at the end of each day, or whatever cadence you choose. Plus, each worker receives a Branch Card and digital wallet where they can store and transfer funds, spend, and track payment history through the Branch App.

• Immediate payouts to make final paychecks a breeze. Branch allows you to send employee tip payouts as soon as shifts are complete, meaning you can stay compliant with final paycheck laws and also ensure a seamless payouts experience. Fast, digital payouts are also a plus for seasonal workers since employees who get access to a Branch account can take their account with them for life, meaning you don’t have to track down employees after their last shift to send them payment.

• Works for more of your workforce. Branch works for more of your workforce—even minors 14+ and unbanked or underdocumented workers. Support more of your tipped workforce with our Essential account, which allows workers with limited documentation to still receive tips through the Branch App. 

• Does not have to be mandatory. Some tip payout solutions require that you use them to process all wages, tips, and payments. But in the state of California, you must also provide the option to receive tips on paper checks if the employee wishes. You do not have to mandate Branch at your organization; you can offer us as an option for fast, digital tip payouts to your employees without requiring that employees be paid through Branch. 

From NorCal to SoCal: Branch Is Here to Help

We work with hospitality businesses across the state of California—and across the nation to make fast, flexible payouts of tips, wages, and other kinds of earnings.

Contact sales@branchapp.com to learn more about how Branch can streamline tip payouts while navigating the regulatory requirements in California.

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