The Federal Trade Commission recently announced a proposed settlement of $61.7 million to resolve claims that Amazon committed wage theft by keeping tips belonging to its drivers working for its Amazon Flex, Prime Now, and AmazonFresh products.
When can a company keep your tips and how do tips have to be divided among employees? Our experienced wage and hour class action attorneys break it down.
Amazon Drivers Win $61.7 Million In Wage and Tip Theft Settlement
The U.S. Federal Trade Commission stated today that it reached a settlement with Amazon that requires Amazon to pay $61.7 million to settle claims that it kept a portion of customer tips that were to be given to its Amazon Flex and other drivers over the last two years.
“Rather than passing along 100 percent of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” said Daniel Kaufman, acting director of the FTC’s Bureau of Consumer Protection, in a statement. “Our action today returns to drivers the tens of millions of dollars in tips that Amazon misappropriated, and requires Amazon to get drivers’ permission before changing its treatment of tips in the future.”
An Employee’s Right to Their Tips
Under California law, tips are protected just like wages such as an hourly wage or salary. That means that once they are earned by a worker, they belong to the worker (with few exceptions).
A “tip” or “gratuity” is defined as any money paid or left for an employee by a customer over the costs of the goods purchased. In plain English, a tip is any voluntary payment made by a customer to an employee that is not part of the cost of the food or goods purchased. An employer also is forbidding from deducting credit card changes from the tip—so even if an employee pays with card, the entire tip must be paid to the employee.
In California, employers are prohibited from collecting, taking, or keeping in any way tips paid to an employee. The law expressly provides that every tip is the sole property of the employee or employees to whom it was paid, given, or left for.
(Unfortunately, and contrary to what one might think, mandatory service charges are not tips and may be kept by the restaurant or distributed as the employer wants—except where that is prohibited by a local ordinance, like in the City of Santa Monica.)
Finally, a California employer cannot use tips to subsidize or credit your wages against minimum wage. You must be paid minimum wage plus whatever tips you have earned.
Tip Pooling is Allowed
One significant change in California law regarding tips deals with “tip pooling,” which occurs when some or all of the tips paid to an employee are pooled with all or some of the tips earned by other employees and then redistributed according to a set formula. Tip pooling in California is legal provided that only employees are in the pool and that the formula for distribution is fair and reasonable. However, back of house staff and other employees in the chain of service are not ineligible to participate solely because they do not directly serve customers.
Managers—those with authority to hire and fire employees—are considered an “employer” for purposes of determining tip theft and so they cannot participate in a tip pool.
Talk to an Experienced Wage and Hour Attorney
If you think you have been forced to give up tips, had your tips taken away, or ahd your tips used to “increase” your wage to minimum wage, you’ve likely been a victim of wage theft. You should contact an attorney to understand your claims. We are passionate about helping victims of wage theft and helping them stand up for themselves and their right to earn a fair living wage.
If you may have your tips stolen by your employer, do not hesitate to contact us today through our website or give us a call at (213) 214-3757 to schedule a free consultation.