Metropolitan News-Enterprise


Tuesday, August 10, 2010


Page 3


Supreme Court: Law on Employee Tips Contains No Right to Sue


By STEVEN M. ELLIS, Staff Writer


State law prohibiting employers from taking tips patrons leave for employees does not contain a private right to sue, the California Supreme Court ruled yesterday.

Resolving a split among panels in the Court of Appeal, the justices unanimously threw out a former Hawaiian Gardens Casino dealer’s class action under Labor Code Sec. 351. The statute declares that a gratuity is “the sole property of the employee or employees to whom it was paid, given, or left for.”

Justice Ming W. Chin wrote that the Legislature did not intend to give employees a new statutory remedy to recover misappropriated gratuities. He also rejected claims that employees have no other remedy, noting that they can sue for common law conversion.

Former dealer Louie Hung Kwei Lu sued the casino, claiming its policy of requiring dealers to segregate 15 or 20 percent of their tips—depending on the location of the table and the game dealt—and pay them into a pool violated the statute. The casino distributed the pooled tips to various service workers, including chip runners, coordinators, hosts, “floormen” and concierges.

Los Angeles Superior Court Judge David Minning granted summary judgment to the casino’s owner, concluding that Sec. 351 did not provide a private cause of action for employees to recover any misappropriated tips from employers.

A number of panels have held that the statute does not extend to employer-mandated tip pooling, at least in the restaurant context.

Div. Three of this district’s Court of Appeal, in an opinion by Justice Richard Aldrich, agreed with Minning that the statute did not contain a private right to sue. However, the court reversed, concluding that Sec. 351 may still support a Unfair Competition Law claim because Lu presented triable issues of fact as to whether the statute prohibited certain employees from participating in the tip pool as “agents” of the casino.

Less than two months later, the First District’s Div. Two, in an opinion by Justice James R. Lambden, expressly disagreed with the holding that Sec. 351 did not contain a private right of action in Grodensky v. Artichoke Joe’s Casino (2009) 171 Cal.App.4th 1399.

On review limited to that issue, Chin disagreed with Lambden, he said, because the statute did not “unmistakeably” demonstrate an intent by the Legislature to grant employees such a right.

“For instance, section 351 does not expressly state that there is a cause of action for any violation; nor does it refer to an employee’s right to bring an action to recover any misappropriated gratuities,” he wrote. “Rather, if an employer violates section 351 or any other provision in article 1, that employer is guilty of a misdemeanor and is subject to a fine and/or imprisonment.”

Instead, Chin said, the legislative history showed that the “sole property” language in the statute was included to prevent employers from sharing in employees’ tips and other gratuities.

He explained:

“[T]he declaration that ‘[e]very gratuity’ is the ‘sole property of the employee or employees to whom it was paid, given, or left for’…simply affirmed what courts had ‘long held’: that gratuities ordinarily belonged to the waiter or waitress absent a contrary agreement.”

Chin rejected Lu’s argument that it would be “absurd” to conclude that the Legislature would declare that gratuities belong to employees yet deny them access to the courts to enforce those property rights.

“Contrary to plaintiff’s suggestion, our holding that section 351 does not provide a private cause of action does not necessarily foreclose the availability of other remedies,” he commented. “To the extent that an employee may be entitled to certain misappropriated gratuities, we see no apparent reason why other remedies, such as a common law action for conversion, may not be available under appropriate circumstances.”

The case is Lu v. Hawaiian Gardens Casino, Inc., 10 S.O.S. 4640. 


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