Wage Ruling Clears Up Tip Questions For Calif. Employers

Law360 (November 20, 2019, 3:43 PM EST) -- On Oct. 31, in Lauren O’Grady v. Merchant Exchange Productions Inc., the California Court of Appeal's First Appellate District held that a service charge could be a gratuity under Labor Code Section 351, such that it would be required to be paid to nonmanagerial employees as a gratuity.

In light of O’Grady, employers should review their mandatory service charge policies and practices both to:

Ensure clear communication to employees and customers; and Avoid conflating service charges with tips.

Distinction Between Service Charges and Tips

The California State Board of Equalization distinguishes between a service charge and a gratuity or tip in Publication...

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