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Employment Development Department
Employment Development Department

Total and Partial Unemployment TPU 460.5

Gratuity

Sections 1252 and 1279 of the Unemployment Insurance Code state in part:

"For the purpose of this section only the term 'wages' includes any and all compensation for personal services whether performed as an employee or as an independent contractor."

A gratuity is a gift given without regard for return. Therefore, a true gratuity is not wages, since it is not compensation for personal services.

For example, a claimant is off work on a prolonged unpaid sick leave. His employer gives him token payments to insure his returning to work. These payments are a gratuity or gift and not wages, because no services were performed for them.

In Benefit Decision 6159, the Board considered the case of a claimant in receipt of gratuitous payments and held that they were not wages. The claimant worked as a musician in a motion-picture production. Fourteen years later the picture was reissued for use on television. The producer and the union entered into an agreement whereby each musician who was employed in the original production was paid $25 from a fund set up for this purpose. These payments were not made under the original contract of employment when the picture was made. The Board stated:

"If, in the instant case, the payments made to the union and distributed to the qualified members were not wages, the claimant involved herein would qualify as an unemployed individual.

In the case before us, the payment was not conditioned upon the rendering of services subsequent to the creation of the Fund. The claimant had already been fully compensated for his services and the employer's liability therefor had been completely discharged. The claimant performed no additional services for this payment . . . . Accordingly, we conclude that the $25 paid to the claimant was not wages and therefore cannot be used in determining his eligibility to receive benefits during the weeks involved herein."

Most payments which are called gifts or gratuities are not true gratuities because they are paid as compensation for a personal service. The most common payment of this type is tips. (See TPU 460.63.)

Another example is the money a minister receives from his congregation by means of the collection plate. This money is freely given, but is not a true gratuity since the money is given in exchange for the service that the minister rendered his congregation. Therefore, this money would have to be deducted from the weekly benefit amount.