In certain industries and occupations, tips are incredibly important to employees. Some business incorporate tip pools, where employees are required to contribute a certain portion of their tips into a tip pool that is distributed among various employees. In a recent California Supreme Court case, Lu v. Hawaiian Gardens Casino, the plaintiff argued that the Casino’s tip pooling requirement violated Labor Code section 351, which states that the tips are the property of the employee for whom they are left.
The California Superior court held that Labor Code section 351 did not provide private litigants a direct right to sue for the alleged taking of their tips by their employer. The Court looked at the express language of the statute and the legislative history in reaching its decision. The Court noted that in certain circumstances, an employee could pursue a civil tort claim for conversion, and that the Legislature could change the Labor Code to allow a private right of action.
Finally, the Court was clear that its ruling was limited solely to the issue of whether a private right of action exists for employees under Labor Code section 351. The Court did not give an opinion on whether tip pooling itself is lawful, nor did it give any parameters for tip pooling plans. As such, the Lu opinion should not be construed as to eliminating the ability of employees to sue for violations of tip pooling plans. Employees could still bring a claim under California’s conversion or unfair competition laws. If your business incorporates tip pooling, be sure that the process is handled fairly and administered accurately. Also, be on the lookout for further clarification from the courts on tip pooling in the near future.
