Under California law, every employer must have a valid workers compensation insurance coverage regardless of the number of employees he/she employs and regardless of whether the workers are considered employees or independent contractors. Failure to have a workers compensation insurance is a criminal violation in California, punishable by imprisonment up to one year and fines in excess of $10,000. 

If you are an employer, there is simply no good reason to not have a workers compensation coverage. Out of all, the greatest value of such coverage for an employer is the fact that workers compensation insurance preempts civil action for injuries sustained at work that are reasonable expected to be suffered at a given workplace. In other words, if your employee is injured, she cannot sue you individually or your business for those injuries, and she must proceed through your workers compensation insurance claim process. This virtually insulates you from potentially great financial liability for your employee's work related injuries. Surely, like with car insurance and homeowners insurance, your workers compensation premiums will be increased after a claim is filed, but it will likely be a much lighter financial burden than having to settle a civil injury case with your employee and having to pay the award out of your pocket or the pocket of your company. 

Workers compensation insurance also helps employees recover money for their injuries, since it's a no-fault system. That is, an employee doesn't have to prove anyone's fault in proving his injuries and damages, and the mere fact of sustaining a work-related injury is sufficient to obtain compensation under the policy.

 
 

What is a tip?
A tip (or gratuity) is the money that a customer leaves an employee over the actual amount due for the goods or services received. This tip money belongs to the employee, not the employer. 

Is it legal for my employer to deduct my tips from my paycheck?
No. Your employer cannot take your tips (or any part of them), and cannot deduct money from your pay because of the tips your earn. Your employer also cannot credit the amount of your tips against the money he owes you. You do not have to pay back your tips to your employer with one exception that is explained below.

When a customer pays with credit card, my employer deducts the credit card company's fees from the tips they leave. Is this legal? 
No. Since the employer has chose to use the services of the credit card company, the employer must pay that cost. The fee is a cost of doing business for your employer that he cannot shift to you. 

I made an agreement with my employer that he can deduct my tip money from my check. Is this allowed? 
No. An employer cannot get around any of the laws mentioned above by getting an employer to agree to a deduction. Like many other employment related matters, many laws and rules, especially the ones that concern public policy, preempt and trump any private agreements at work place. This includes most of the tip pooling laws. 

My employer pays me less than minimum wage because he includes my tips in my hourly pay. Is this legal? 

No. Although some states allows employers to pay tipped employees less, California requires that they be paid minimum wage, a calculation of which does not include tips.

I was told to share my tips with other employees, even though I am the one receiving tips directly from customers. Do I have to share my tips? 

Sharing tips with other employees is called "tip pooling" or "tipping out" and is usually legal if it is common in your trade (e.g. restaurant workers). Since tips belong to the employees who helped "serving the customer," and sometimes more than one employee "serves" a customer (e.g. cooks, bussers, and waiters all make sure that the customer gets good service), it is OK for your employer to force you to share tips with those other employees that help. As long as you only share tips with employees who somehow help the customer, and not supervisors or managers, forced tipping out is legal. However, the tip pooling arrangement must be reasonable. If you have to tip out too much to other employees, the arrangement may not be legal. For example, it is usual in the restaurant business for a waitress to tip out 15-20% to other employees, so this arrangement is almost certainly reasonable. On the other hand, if a waitress has to give up 60% of the tips she collects to other employees, this arrangement is probably not legal.  

Are all employees who receive tips protected?
Yes, with one exception. If an employee provides a service for customers but the business doesn't charge for that service, the employee may have to pay her tips back to her employers. Examples are a valet parking attendant who parks cars for a restaurant and a coat checker in a theater where the customer is not charged for the service. The employer must still pay minimum wage, and the employee must be paid her wage or salary in full, even if the tips collected are not enough to cover the employee's wages or salary.