Wage Theft in California: Your Rights

California recently passed a law that criminalizes intentional wage theft and applies to employers of all sizes. As such, an individual owner, a managing executive, or a manager of a business can personally face criminal charges related to wage theft. Further, the law establishes a grand theft threshold. If an employer is found to have engaged in more than $950 in wage theft from an individual employee or more than $2,350 from 2 or more employees over a 12-month period, they can face criminal charges of grand theft that come with serious legal consequences. This law extends its reach to employers of independent contractors, such as workers in the ever-expanding gig economy.

Employers can face up to one year in jail if the grand theft charge is brought as a misdemeanor and up to three years in prison if it’s brought as a felony, and there are also considerable fines imposed. California takes employer wage theft exceptionally seriously, and employers should, too.

California’s imposed minimum wage is higher than anywhere else in the nation other than Washington, D.C., and New York City. The minimum wage that employers who have fewer than 26 employees must pay throughout the state is currently $14 an hour, but this minimum will rise to $15.50 an hour for all employers on January 1, 2023. Employers of 26 or more employees are currently required to pay a minimum of $15 an hour. Some California cities and counties impose their own minimum wages, but they must exceed those set by the state. The minimum wage applies to almost all employees in California. Some of the very few exceptions include:

• Outside salespeople
• The parent, spouse, or child of the employer
• Apprentices under the State Division of Apprenticeship Standards

There is also an exception for employees who are learning their jobs – with no previous related or similar experience – that requires payment at 85 percent of the minimum wage (rounded to the nearest nickel) during the first 160 hours on the job.

In California, overtime pay is a legal requirement. The general overtime rules apply to all nonexempt employees – employees who make less than a specific yearly amount and are, therefore, not considered salaried – and they include:

• Nonexempt employees are entitled to time-and-a-half pay for work that exceeds eight hours in any workday.
• Nonexempt employees are entitled to time-and-a-half pay for work that exceeds 40 hours in any workweek.

Additionally, employees are entitled to double pay in the following situations:

• Nonexempt employees are entitled to double pay when they work more than 12 hours on any given workday.
• Nonexempt employees are entitled to double pay when they work more than eight hours on the seventh consecutive day of a workweek – and are entitled to time-and-a-half pay for the first eight hours on the seventh consecutive day of a workweek.

In California, tips are the sole property of the employee to whom they are given or are intended to be given. It doesn’t matter if a person hands you a tip directly or leaves a tip for you – it belongs to you. California employers are legally barred from taking any portion of tips that are left for servers, and doing so amounts to theft. This is true in spite of the fact that tips are your property and are not actually wages. As such, it is important to consider the following:

• In California, tips cannot be deducted from your minimum wage per hour. For example, if you receive an average of $10 an hour in tips, it in no way affects your minimum wage requirement.
• California employers are required to pay servers the minimum wage regardless of whether or not they receive tips.
• California employers cannot charge employees a service or processing fee for tips that are left for them on credit cards

Tips are generally left to the sole discretion of customers, and they are classified as gratuities, not wages, which means they do not affect the overtime calculation process. It is important to note, however, that the IRS treats most tips as taxable income.

California does allow what is known as tip pooling, which means employers can require servers to share their tips with other employees under certain circumstances. Tip pooling amounts to pooling all or some of the tips received by servers and distributing them fairly and responsibly according to a predetermined formula that is in accordance with state laws, including:

• The tip pool consists of employees only
• The tip pool is funded with tips given to these employees
• The tip pool excludes the employer and any agents of the employer from receiving tips

An agent of the employer in this context is anyone who has the authority to hire or fire the employees in the tip pool or who supervises, directs, or controls what the employees in the tip pool do on the job. A manager is allowed to benefit from the tip pool if they share in the same tasks that the non-agent employees do. All employees who are in what is considered the chain of service are eligible to participate in the tip pool. While servers, hosts, bartenders, and bussers are typically considered links in the chain of service to customers, cooks, cashiers, and dishwashers are not.

All employers in the private sector must adhere to the WTPA unless a specific exception applies.

Employers are required to provide every employee with specific work-related information in writing, including:

• Their rate of pay and whether they are paid by the hour, shift, day, week, piece, salary, commission, or otherwise
• Any work allowances
• The regular payday as designated by the employer and as required by state law
• The employer’s name, including any doing business as designation
• The physical address and mailing address of the employer’s main office or primary place of business
• The employer’s telephone number
• The contact information for the employer’s workers’ compensation insurance provider

No, state law requires all employers to follow all WTPA requirements, and none of them are subject to waiver.