• California Supreme Court Affirms No Private Right to Sue under State Tip Law
  • August 26, 2010 | Author: Mark S. Askanas
  • Law Firm: Jackson Lewis LLP - San Francisco Office
  • The California law prohibiting employers from taking or sharing in tips left for employees by customers does not give private litigants a right to sue their employers directly for an alleged misappropriation of tips, the California Supreme Court has ruled.  Lu v. Hawaiian Gardens Casino, Inc., No. S171442 (Aug. 9, 2010).  The decision settles a split among the state appellate courts.

    The Facts
    At the close of each shift, card dealers at the Hawaiian Gardens Casino were required by the employer’s tip pool policy to segregate 15 to 20 percent of the tips they received.  The Casino would deposit the money in a tip pool account for distribution to designated employees who provide services to customers.  These included chip runners, poker tournament coordinators, poker retention coordinators, hosts, customer service representatives, and concierges.  The employer, managers and supervisors were prohibited from receiving money from the tip pool account under the tip pool policy.

    A card dealer, Louie Hung Kwei Lu, sued his casino employer, claiming, among other things, that the tip pooling policy violated state Labor Code Section 351, which provides that a gratuity is “the sole property of the employee or employees to whom it was paid, given, or left for.”

    The trial court concluded that Section 351 does not provide a private litigant a right to sue to recover allegedly misappropriated tips and granted summary judgment to the employer.  The appellate court agreed.  At about the same time, another appellate court disagreed with this interpretation of Section 351 in Grodensky v. Artichoke Joe’s Casino.

    No Private Right to Sue under Section 351
    The California Supreme Court decided to take up Lu v. Hawaiian Gardens Casino to settle the limited question of whether Section 351 created a private right of action for employees.  Without ruling on the legality of the defendant’s tip pool policy, the Court found no private right of action for employees under Section 351, either explicitly or implicitly.  Accordingly, the Court affirmed dismissal of the Section 351 claim.

    * * *

    Despite its ruling on Section 351, employees are not without other options, the Court pointed out.  They can look to the Labor Commissioner to sue on their behalf and to the Legislature to change the law.  If an employer violates Section 351, that employer is guilty of a misdemeanor and is subject to a fine or imprisonment in a case brought by the Labor Commissioner.  Additionally, employees can pursue other types of claims, such as under the state unfair competition law, to recover misappropriated tips in a proper case.