I own a restaurant and most of the payments for the meals and tips are paid by credit card. To make it easier on my accounting staff, I want to be able to pay out the tips left on the credit cards at the end of each month. Is there any problem with paying the tips on a monthly basis?
Unfortunately, you will not be able to implement that system without violating California law.
California Labor Code Section 351 specifically addresses this issue. The code section states, in pertinent part: “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…Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for…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…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.”
As a result, depending on how often you pay your employees, the tips left on credit cards must be paid on either a weekly, biweekly or semi-monthly basis. The state views tips as the exclusive property of the employee(s), and therefore, they must be paid to the employee(s) as soon as practical, and no later than the next regular payday following the date on which the tip was left for the employee(s).
You cannot pay the tips on a monthly basis. If you have a semi-monthly pay schedule, you can pay the tips on a twice monthly basis, no later than the 26th day of the month and the 10th of the following month.