Can Credit Card Processing Fees be Deducted From Tips You Have Earned?

If you are a tipped employee, and your customers pay by credit card, look at your pay stub, or whatever other document reflects the tips you have earned as a result of customers paying by credit card. Are you getting everything that you have earned—that is, the entirety of whatever amount customers have tipped you?

Deducting Expenses

Many employers try to get away with deducting expenses—especially credit card fees—from tips that employees earn. The employers say that these are expenses that they incur, and that they aren’t “keeping” the employees tips, the tips are going to pay an expense—the credit card fee.

Deduction is Illegal

But while all this may make some sense, in California, that isn’t the law. Employers must bear the costs and expenses of doing business. That means that your employer cannot take anything out of your earned tips that reflect a cost or expense that the employer has.

That may include things like repair of property, or any other shared expense—including credit card processing fees.

California is More Protective

Note that California is unique that way. In fact, the federal government has said that employers can deduct processing fees from tips (but only the percentage of the processing fee that is based on the tip, not the entirety of the bill).

But the State of California has opted to be more restrictive, and forbids employers from doing this.

Playing on Emotion

Employers often try to play on employees’ emotions, to justify deducting credit card fees from earned tips. For example, they may say that the business may have to close, and thus, everybody would lose their job, if tipped employees didn’t pay to or contribute to the cost of credit card processing fees.

But don’t be misled; business owners do have other options, and plenty of businesses manage to pay credit card fees, and still allow employees to keep their tips.

When employers do, illegally, deduct credit card processing fees from your tips, they are essentially not paying you the tips you have earned. That means that they are in violation of the Fair Labor Standards Act (FLSA), and California wage and hour laws.

Other Tipping Laws

Remember as well when it comes to tips, that although your tips can be shared amongst other tipped employees in a tip pool, none of that pool can go to management, the business, or any other employee or officer of the company that may be a non-tipped position.

Whenever you get the indication that the tips you are getting in your pocket at the end of every day or pay period, are less than what you feel you have actually been paid in tips, it may be time to speak with an attorney about whether your employer is wrongfully withholding tips, or charging you for an expense you shouldn’t be charged for.

Contact the San Jose employment lawyers at the Costanzo Law Firm today if you feel you are owed money from working that you have not been paid for.

Sources:

hostmerchantservices.com/articles/can-employers-legally-deduct-processing-fees-from-tips/

7shifts.com/blog/california-tip-laws/#:~:text=California%20tip%20laws%20also%20differ,code%20doesn’t%20allow%20this.