Q: When I pay gratuities to my employees, for the amount of gratuities that is paid by credit card, can I deduct credit card processing fees?
A: No, an employer cannot deduct credit card processing fees from the amount of gratuities that is paid by credit card to an employee. According to California Labor Code § 351, “an employer that permits patrons to pay gratuities by credit card shall pay the employees the full amount of the gratuity that the patron indicated on the credit card slip, without any deductions for any credit card payment processing fees or costs that may be charged to the employer by the credit card company.” An employer is solely responsible for credit card processing fees for gratuities paid by credit card, and an employee is entitled to the full amount of gratuities that is printed on receipts. Moreover, California Labor Code § 351 states that “payment of gratuities made by patrons using credit cards shall be made to the employees not later than the next regular payday following the date the patron authorized the credit card payment.”
If an employer charges credit card processing fees to its employee, it could be seen as an illegal taking of an employee’s property. According to California Labor Code § 351, “no employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer.” Gratuities are sole property of an employee and wages are paid in exchange of his or her labor provided to the employer. Therefore, both gratuities and wages shall be paid to the employee in full. However, an employer has a right to redistribute gratuities earned by all employees. When redistributing, it should be done according to a fair and appropriate principle with which all employees can agree.
If an employer violates any of the aforementioned items, he or she may face legal action taken by an employee.
California Labor Code has been revised in favor of protecting employees’ rights and interests. It is recommended that an employer reviews the entire labor codes. If an employer violated any of the aforementioned items or is interested in learning more about relevant labor codes, please consult our attorneys.