Governor Gavin Newsom signed Senate Bill 648 (SB 648) into law on July 30, 2025, marking a significant step in California’s ongoing efforts to protect service industry workers from wage and tip theft. Effective January 1, 2026, SB 648 amends the Labor Code by strengthening enforcement mechanisms related to gratuities and equipping state officials with enhanced tools to ensure workers receive the wages and tips they earn. While existing law already prohibits employers from withholding employee tips, SB 648 expands and clarifies the state’s ability to enforce these protections. The legislation is particularly impactful for employers in the hospitality, restaurant, and tourism sectors.

Under SB 648, the Labor Commissioner is expressly authorized to investigate allegations of tip misappropriation, issue citations, and initiate civil actions against employers who unlawfully withhold or deduct tips. Previously, the Labor Commissioner lacked this direct enforcement authority with respect to gratuity violations. Specifically, SB 648 amends Labor Code section 351 to grant the Labor Commissioner the power to investigate tip theft claims and impose citations and penalties for violations. SB 648 also affirms employees’ rights to pursue civil actions and recover penalties for the unlawful retention of tips. The law also reinforces that tips added through credit card transactions must be paid in full to employees.

The Labor Commissioner procedures for issuing, contesting, and enforcing a tip violation citation mirror those used for minimum wage violations, creating a more standardized and accessible enforcement process.

SB 648 is especially significant for workers in tip-dependent industries, including restaurant servers, bartenders, hotel and hospitality employees, hair and beauty professionals, and valet attendants. The law aims to curb tip theft, which is one of the most commonly reported forms of wage theft in the service sector.

California employers that utilize tipping structures should review their payroll systems and record-keeping practices to ensure transparency and accuracy in how tips are collected and distributed. Improper handling of gratuities may now result in direct enforcement action from the Labor Commissioner’s office.

Stokes Wagner will continue to monitor updates and will provide additional updates as they become available. If you have any questions, do not hesitate to contact a Stokes Wagner attorney.

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THIS DOCUMENT PROVIDES A GENERAL SUMMARY AND IS FOR INFORMATIONAL/EDUCATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO BE COMPREHENSIVE, NOR DOES IT CONSTITUTE LEGAL ADVICE. PLEASE CONSULT WITH COUNSEL BEFORE TAKING OR REFRAINING FROM TAKING ANY ACTION.