Governor Gavin Newsom signed SB 648 into law, and, as a non-urgency measure, takes effect on January 1, 2026. SB 648 primarily amends Section 351 of the California Labor Code, reaffirming and expanding enforcement of employee gratuity pay (tips) protections.

Under prior law, employers were already prohibited from taking, collecting, or deducting tips from employees’ wages, but enforcement relied heavily on private lawsuits or limited administrative actions. This left workers vulnerable to “tip theft,” where employers might withhold or misappropriate tips, particularly in industries like hospitality and service.

The bill’s purpose, as outlined in its legislative digest, is to strengthen protections by empowering the state’s Labor Commissioner (through the Division of Labor Standards Enforcement, or DLSE) to more actively investigate and penalize violations. This enhances compliance, deters misconduct, and provides a more accessible enforcement mechanism for workers without requiring them to pursue costly civil litigation.

The rationale stems from ongoing concerns about wage theft in tipped industries, aiming to ensure tips remain the sole property of employees and are not used to offset employer costs like credit card fees. According to the Legislative Analyst “some of the lowest paid workers are at risk of having their livelihoods stolen by unscrupulous employers through various violations of law including by taking their tips.”

“According to a 2008 study which surveyed 4,387 workers in low-wage industries in the three largest U.S. cities – Chicago, Los Angeles, and New York City, 12 percent of tipped workers in the sample experienced “tip stealing” during the previous work week.”

Unlike under federal regulations, in California an employer cannot use an employee’s tips as a credit towards its obligation to pay the minimum wage. California law requires that employees receive the minimum wage plus any tips left for them by patrons of the employer’s business.

Although existing law directs the Department of Industrial Relations to enforce the provisions of existing law regarding gratuities, the Labor Commissioner lacks citation authority to recover gratuities taken or withheld from workers. The only option available to the Labor Commissioner to recover stolen gratuities is through filing of an action in court.

Given the limited resources available at the Labor Commissioner’s office, granting the LC the ability to issue citations to recover owed gratuities would go a long way in helping workers. This bill would do just that by authorizing the Labor Commissioner to investigate and issue a citation or file a civil action for gratuities taken or withheld in violation of existing law.

SB 648 was supported by the California Federation of Labor Unions, AFL-CIO. There was no opposition noted in Legislative Analyst,s report.