California Expands Enforcement and Penalties for Tip Violations

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California continues to strengthen employee wage protections with Senate Bill No. 648 (“SB 648”), a new law that amends Labor Code section 351 aimed at enhancing enforcement against tip theft.  

SB 648 reaffirms a core principle of California labor law: tips and gratuities belong exclusively to the employees who earn them, not employers, supervisors, or managers. While this rule already existed, the new law significantly expands enforcement mechanisms and increases potential liability for violations.

What Are the Key Changes Under SB 648?

The law authorizes the Labor Commissioner to investigate gratuity violations, issue administrative citations, and pursue civil actions against employers who unlawfully take or withhold tips. SB 648 also adds civil penalties of $100 for the initial intentional violation and $250 for subsequent violations per violation whether intentional or not, in addition to restitution of all unlawfully retained tips, interest, and attorney’s fees.

Importantly, SB 648 creates a private right of action, allowing employees to file lawsuits directly in court for gratuity violations. Employees may bring claims individually or in a representative capacity on behalf of other affected workers, increasing litigation exposure for employers.

Which Employers Are Affected?

SB 648 applies broadly to any employer that permits or relies on customer tipping, including but not limited to:

• Restaurants, cafés, bars, and food service operators
• Hotels, resorts, and hospitality businesses
• Hair, nail, and beauty salons
• Spas, massage studios, and wellness centers
• Valet, car wash, and parking services
• Delivery, courier, and rideshare platforms
• Event venues and entertainment services

Both traditional brick-and-mortar employers and app-based businesses may also be subject to the law.

What Should Employers Consider and How to be Compliant with the New LAW Compliance Recommendations

Employers should:

• Audit tip policies and practices, including tip pooling arrangements, to ensure only eligible employees participate and managers or supervisors are excluded
• Confirm that credit card processing fees are not deducted from employee tips
• Update written policies and employee handbooks to clearly reflect gratuity ownership and distribution rules
• Train managers and payroll personnel on lawful tip handling and recordkeeping requirements
• Review agreements with third-party platforms or vendors that handle customer payments or tips
• Maintain accurate records documenting tip collection, pooling, and distribution

What’s the Bottom Line?

SB 648 significantly expands enforcement authority and litigation risk related to tip practices. Employers in tipped industries should take proactive steps now to ensure compliance and reduce exposure by revising current tipping policies and practices.