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Tina, Attorney
Category: California Employment Law
Satisfied Customers: 33167
Experience:  JD, 17 years experience & recognized by ABA for excellence in employment law.
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Hi we have a limousine service in calilfornia and nevada..

Resolved Question:

Hi we have a limousine service in calilfornia and nevada.. It is common practice for customers to add the voluntary tip to the bill on there credit card. When this occurrs we as the employer are stuck with the burden of paying the credit card fee of 2.5% and the labor taxes ssi and comp on this tip .. This is costing us Thousands of dollars a year on revenue earned by others. Our intention is to 1099 our employees on all credit card tips and charge the 2.5% credit card fee to the employee. Are we within our legal limits to do so.
Submitted: 5 years ago.
Category: California Employment Law
Expert:  Tina replied 5 years ago.
Hello and welcome,

CA law specifically prohibits an employer from passing the charge onto the employee in this situation. Labor Code Section 351 provides that the employer must pay the employee the full amount of the tip that is indicated on the credit card. The employer may not make any deduction for credit card processing fees or costs that are charged to the employer by the credit card company from gratuities paid to the employee.

See the following link for more information:

NV is also one of the few states that specifically prohibits this practice. Here is a link for you to review:

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Customer: replied 5 years ago.
Can the employer 1099 for all tips seperate from payroll? currently we are catagorizing hourly wage and tips in
Expert:  Tina replied 5 years ago.
Hello again,

No, this would typically violate the intent of the state laws indicated above and if the workers are properly classified as employees and not independent contractors under the law, then a 1099 would not be appropriate in any case.

I would not suggest reducing employee wages for the fee in any manner.

Tina and other California Employment Law Specialists are ready to help you

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