Can we use a tip credit to make sure our employees make at least the minimum wage?

Q. It has been our practice to pay our waiters and waitresses less than the minimum wage because we include their tips in their hourly wage. Is this legal?

A. No. The practice is lawful under the federal Fair Labor Standards Act, as long as employees’ tips and wages total at least the minimum wage, but that’s not the case in California.

In California, an employer cannot use an employee’s tips as a credit toward its obligation to pay the minimum wage. California Labor Code §351 requires employers to pay tipped employees the minimum wage in addition to any tips left for them by patrons.

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