California Workers Gain New Protections Against Tip Theft: What You Need to Know

For many workers in California, tips are not just an occasional bonus but a crucial part of their income. Restaurant servers, hotel staff, hairdressers and other service workers often rely on gratuities to cover everyday expenses. Yet disputes over tips are not uncommon, and workers can find it difficult to enforce their rights when employers fail to follow the law.

Senate Bill 648 (SB 648) was signed into law on July 30, 2025. It gives California workers in service industries new tools to protect themselves from tip theft and holds employers accountable for failing to pay gratuities properly. SB 648, which goes into effect on January 1, 2026, allows the state’s Labor Commissioner to investigate tip theft and issue fines for violations.

What California Law Already Says About Tips

California has long barred employers from keeping any part of a tip intended for a worker. Employers cannot use gratuities to cover business costs or treat them as a credit against wages. The law also requires that if a customer pays a tip by credit card, the employer must pay the worker the full amount shown on the receipt. Employers are not allowed to deduct processing fees or other costs from the worker’s tips.

Unlike many other states, California does not allow a lower tipped minimum wage. Employers must pay at least the state or local minimum wage for all hours worked, in addition to ensuring workers receive the full amount of any gratuities left by customers.

What SB 648 Changes

While tip protections have existed for years, enforcement has been limited. Before SB 648, workers who experienced tip theft had few options other than filing a claim with the state Labor Commissioner’s office or under the Private Attorneys General Act (PAGA). The commissioner could investigate wage theft but did not have the authority to issue citations for stolen tips.

SB 648 changes that by authorizing the Labor Commissioner to investigate tip theft, issue citations and impose civil penalties. Employers who withhold tips can face fines of $250 per violation, with willful violations carrying a penalty of $1,000. These penalties are in addition to paying back any wages and gratuities owed to the worker, including possible interest and attorney’s fees.

The law also allows workers to bring their own claims directly in court for tip violations. This gives employees more control over enforcing their rights, even if the Labor Commissioner does not pursue a case.

California law continues to allow tip pooling in certain circumstances, but only employees who provide direct service to customers may share in pooled tips. Tip pools cannot benefit owners, managers or supervisors.

Who Is Affected?

SB 648 applies broadly to industries where tipping is common. This includes restaurants, bars, hotels, spas, nail salons, barber shops and other businesses that rely on gratuities as part of the pay structure for their workers. Rideshare and delivery services may also be affected, since tips in those industries are meant to go directly to drivers and couriers.

Employers in these fields are now under greater pressure to make sure they comply with California’s tipping laws. They are also required to maintain accurate records of gratuities received and to make those records available to the California Department of Industrial Relations if requested. This requirement aims to provide transparency and make it easier to confirm whether tips are being distributed correctly.

Contact an Employment Lawyer if You Suspect Tip Theft

For workers, the passage of SB 648 provides stronger tools to recover stolen tips. If your employer withholds any part of your tips, deducts processing fees, delays payment or distributes gratuities in violation of the law, you may have the right to seek compensation and penalties.

You don’t have to face this situation alone. Having an experienced San Francisco employment lawyer on your side can make a difference in recovering what you are owed. At McCormack Law Firm, we help workers fight against tip theft and resolve other employment disputes. Contact us today for a free initial consultation to discuss your situation and learn about your options.