Please see the attached letter, which I drafted to send today to the California Supreme Court on behalf of the California Employment Lawyers' Association.
Via First-Class Mail
April 29, 2009
The Honorable Ronald M. George, Chief Justice
and Associate Justices
California Supreme Court
350 McAllister Street
San Francisco, CA 94102
Re: Amicus Curiae Letter (Rule 8.500(g))
Lu v. Hawaiian Gardens Casino, Inc. (2009) 170 Cal.App.4th 466, 88 Cal.Rptr.3d 345
California Court of Appeal, Second District, Division 3, No. B194209, Petition No. 171442
Dear Chief Justice and Associate Justices:
This is a letter under Rule 8.500(g) of the 2009 California Rules of Court in support of the petition for review by the Plaintiff/Appellant in Lu v. Hawaiian Gardens Casino, Inc. (2009) 170 Cal.App.4th 466, 88 Cal.Rptr.3d 345, California Court of Appeal, Second District, Division 3, No. B194209 (hereafter, Lu). This letter, on behalf of the California Employment Lawyers Association (CELA), seeks to have this Court define the scope of permissible tip pooling. The Court of Appeal’s decision in Lu is just one of several recent decisions by Courts of Appeal attempting to define the parameters of permissible tip pooling without Supreme Court guidance.[1] Though this Court has discussed Cal. Lab. Code §351, the basis for the instant dispute (see Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 166 Cal.Rptr. 331, and Henning v. Industrial Welfare Com. (1988) 46 Cal.3d 1262, 252 Cal.Rptr. 278), this Court has never weighed in on the extent to which employers may appropriate money given by customers to service employees as gratuities and distribute it to other non-supervisory employees.
California Courts of Appeal have long followed Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062, 268 Cal.Rptr. 647 (decided closely on the heels of Henning), which ruled that enforced tip pooling between servers and bussers at a restaurant is permissible under §351. Leighton emphasized that the regulation states that a gratuity is “hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.” (Ital. added to emphasize the plural.) However, recent decisions have begun to extend the tip pooling concept beyond merely multiple service employees assisting a single customer at a restaurant table. Lu stretches the tip pool to sharing tips between a casino dealer (who directly received the tip from the customer for his/her service) and chip runners, hostesses, poker tournament and poker rotation coordinators, customer services representatives or “floormen,” and concierges. Lu, 170 Cal.App.4th at 471. CELA believes that the better-reasoned view is that tip pooling can only be proper, under the plain language of §351, between non-supervisory employees[2] for whom the gratuities in question were “paid, given, or left for.” Under §351, tip income must not be used by an employer to subsidize the wages of other non-supervisory employees who were not responsible for the service which caused the customer to provide a gratuity.[3]
I. Interest of Amicus
The undersigned writes on behalf of CELA, a “person” within the meaning of Rule 8.500(g), seeking to support the petition for review. CELA is a statewide non-profit organization dedicated to protecting workers’ rights. CELA’s member attorneys represent employees in all types of employment cases in state and federal courts and before administrative agencies, including employment discrimination, wrongful discharge, wage and hour, and unemployment insurance matters. In each of these substantive areas of law, CELA’s members and their clients challenge employers who fail to adhere to California and federal employment laws. CELA frequently appears as amicus curiae in matters before this Court, including, e.g., recent appearances in Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 56 Cal.Rptr.3d 880, Gentry v. Superior Court (2007) 42 Cal.4th 443, 64 Cal.Rptr.3d 773, and Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 81 Cal.Rptr.3d 282.
CELA’s members have an abiding interest in the scope of permissible tip pools, directly at issue in this case. In particular, CELA seeks to ensure that the concept of tip pooling is not abused so as to undermine employees’ property interest in their gratuities, guaranteed by Labor Code §351, and that the State’s wage and hour laws are “liberally construed with an eye to promoting [worker] protection,” as this Court required in Henning, 42 Cal.3rd at 1269 (citing Industrial Welfare Com’n, 27 Cal.3d at 700-703). CELA hopes that this Court will not permit an interpretation, like that applied in Lu, which results or could result in tips given directly to millions of California non-supervisory workers being misappropriated to defray employers’ labor costs with respect to other workers.
II. Review is Warranted
In Henning, 46 Cal.3d at 1279-1281, and Industrial Welfare Com’n, 27 Cal.3d at 729-731, the Court applied §351 to eliminate the practice of tip crediting, which had been used to pay service employees receiving gratuities less than the minimum wage, or a lower minimum wage than non-tipped employees. Part of the rationale for these decisions eliminating tip crediting and the two-tiered minimum wage was that “a lower minimum (which in itself is to provide an adequate) wage is only possible because tips are used to subsidize it” (see Henning, 46 Cal.3d at 1278, citing Industrial Welfare Com’n) – and employers should not be able to use tips (the property of the employees who received them) to subsidize otherwise inadequate wages. This Court discussed the legislative history behind §351, noting that the section, in its current form, was designed to prevent employers from “obtain[ing] the benefit (as, in effect, the payment of wages) of tips and other gratuities received by their employees,” and “from taking any tip given by a patron to his employee.” Henning, 46 Cal.3d at 1279.
The Leighton court discussed some practical difficulties behind this public policy, and held, pragmatically, that tip pooling cannot be prohibited in all circumstances, such as where servers and bussers are together working at a restaurant table. The Court of Appeal explained, in language cited by the Lu court and others:
"We dare say that the average diner has little or no idea and does not really care who benefits from the gratuity he leaves, as long as the employer does not pocket it, because he rewards for good service no matter which one of the employees directly servicing the table renders it. This, and the near impossibility of being able to determine the intent of departed diners in leaving a tip, in our view, account for the Legislature's use of the term 'employees' in declaring that 'every such gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.' (Lab.Code, § 351, italics added.) It is clear that the Legislature intended by this section to cover just such a situation." Leighton, 219 Cal.App.3d at 1069.
However, the Lu court disingenuously extends this language to the present situation. CELA hopes this Court will recognize the difference between leaving a gratuity in a tip cup at a coffee shop counter or on a table at a restaurant, where it may be pooled between all the non-supervisory employees providing the service the customers received, and a tip given directly to (for example) a casino dealer working at a table alone, apparently to recognize him/her. In the latter situation, there is no need to divine the customer’s intentions – he/she is tipping the dealer. There is no reason to believe that the customer intended also to recognize chip runners, or hostesses (who are separately tipped), etc. This is not a scenario in which rejection of tip pooling would create counter-productive incentives for employees and workplace strife, as in Leighton, 219 Cal.App.3d at 1070. There, the rejection of tip pooling between servers and bussers might lead to tips being commandeered by the first person to grab them off the table, and infighting as a result. Id. Here, the dealer need not fight for the tips he/she is given or swipe them before other employees notice – the tips are given to or left for him/her directly, and no one else.
The casino simply wants to subsidize the wages of its chip runners and others who do not receive tips by giving them part of the tips earned by dealers. According to Henning, this is against the legislative intent of §351, because it is taking money out of the dealers’ hands and using it to keep down the employers’ labor costs. While CELA would certainly condone an effort to ensure greater pay for chip runners and other non-tipped employees, and they will need to receive greater wages to attract their labor, if they are not receiving portions of dealers’ gratuities, their pay should not come out of the pockets of the tipped employees – but from the casinos.
The plain language of the statute is that the gratuities become the property of the non-supervisory employees for whom they are left. “Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.” Cal. Lab. Code §351. Courts do not need to get into case-by-case findings regarding customers’ intent, which, as Leighton explained, can be vague. But it is safe to hold that, where tips are left in a tip cup or at a restaurant table, they are the property of all non-supervisors involved in providing the customer with good service – whereas, when tips are handed to a casino dealer or left at a casino table where a dealer is still sitting and where he/she is the only person working, the tips are the sole property of that dealer.
III. Conclusion
For the foregoing reasons, CELA hopes this Court will not permit courts to follow Lu, allowing the spreading to non-tipped employees of gratuities earned by and owned by particular employees, designed only to avoid payment of competitive wages in the labor market. Please grant the petition for review.
Thank you for your consideration.
CALIFORNIA EMPLOYMENT LAWYERS’ ASSOCIATION
BRYAN SCHWARTZ LAW
/s/Bryan J. Schwartz
___________________________
Bryan J. Schwartz, SBN 209903
180 Grand Avenue, Suite 1550
Oakland, CA 94612
Tel. 510-444-9300
Fax 510-444-9301
Email: Bryan@BryanSchwartzLaw.com
Website: http://www.bryanschwartzlaw.com/
[1] See also, e.g., Budrow v. Dave & Buster’s of California, Inc. (2009) 171 Cal.App.4th 875, 90 Cal.Rptr.3d 239; Etheridge v. Reins International California, Inc. (2009) 172 Cal.App.4th 908, 91 Cal.Rptr.3d 816.
[2] All courts agree that supervisory employees must be strictly excluded from tip pools, and CELA does not challenge the portion of Lu addressing this issue. See Cal.Lab. 350(a) and (d); Lu, 170 Cal.App.4th at 485-486 (citing Jameson v. Five Feet Restaurant (2003) 107 Cal.App.4th 138, 141-143, 131 Cal.Rptr.2d 771).
[3] See Etheridge, 172 Cal.App.4th 908, discussing Henning and Industrial Welfare Commission (“Even though an employer can no longer use tip sharing to subsidize minimum wages of non-tipped employees, it is possible that an employer could use tip sharing to subsidize market wages of non-tipped employees, resulting in the same evil. Thus, when considering tip pooling, it is important to make certain that the employer is not using the tip pool as a de facto tip credit against market wages.”) (emph. in original). See generally id., 172 Cal.App.4th 908 (Klein, P.J., concurring and dissenting) (“The majority opinion here eviscerates section 351 's guarantee that a gratuity belongs to the employee or employees for whom it was left. The majority opinion authorizes the employer to confiscate a portion of the gratuities left for servers and to redistribute those monies to other employees, so as to subsidize the wages of non-tipped employees, in accordance with the employer's self-interest and priorities. For these reasons, the propriety and parameters of employer-mandated tip pooling warrant the prompt attention of the California Supreme Court or the Legislature.”) (emph. in original).
Note that, on the day I wrote the foregoing letter, the Supreme Court did decide to grant review on the Lu case, but only as to whether sec. 351 of the California Labor Code creates a private right of action - not the important issue of how far an employer may stretch a tip pool.
ReplyDeleteCouldn't the statement that every gratuity is hereby declared to the sole property of the employee or employees to whom it is paid, given or left for be explaining that whether a tip is given to one employee or several is to be solely determined by the patron.
ReplyDeleteThe law goes on to explain that the law was enacted to protect the pubic from fraud in connection with the practice of tipping.
The courts seem to suggest that the law is explaining that tips must be considered the property of a group of employees rather than the property of an individual. In fact, the Leighton ruling suggests that patrons don't care if the courts strip them of their right to determine who should be the recipient of their tip.
"We dare say that the average diner has little or no idea and does not really care who benefits from the gratuity he leaves, as long as the employer does not pocket it, because he rewards for good service no matter which one of the employees directly servicing the table renders it. This, and the near impossibility of being able to determine the intent of departed diners in leaving a tip, in our view, account for the Legislature's use of the term 'employees' in declaring that 'every such gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.' (Lab.Code, § 351, italics added.) It is clear that the Legislature intended by this section to cover just such a situation." Leighton, 219 Cal.App.3d at 1069.
The thing is, only when employers are allowed to mandate tip pooling does the intent of the customer seem to be an issue. Could it be that the reasoning behind the law stating that No employer shall collect any part of the gratuities paid, given or left for an employee is that such collecting of tips would create a situation where the court's interpretation of the customer's intent, rather than the actions of the customer, will prevail in determining who the tip belonged to" In other words, haven't the courts now authorized themselves to determine who the patron is given, paying or leaving a tip for? As such, an employee who is given a tip cannot claim that his tip is his sole property or for that matter that his employer is violating state law when his employer takes his tips away from him.
The courts suggestion that a tip should be the property of a group of employees to whom the customer intended to tip seems to ignore the rights and actions of the customer. Could it be that such rulings are simply an attempt to prevent an employee from claiming such property as his own? Could it be that such a ruling is simply an attempt to prevent customers from actually entitling an employee or group of employee to their tip to the point where state laws would cease protect them and the customer?
In fact, the Leighton ruling suggested that it is ridiculous for a waiter to assume that a tip given him is his personal property. Wouldn't such logic also suggest that it is ridiculous for a group of workers to assume that a tip left for them was their personal property? How can anyone assume the intent of each and every customer?
Employer mandated tip pooling is the unauthorized appropriation of private property, the customer's tip. The only thing that has made such acts legal is the court's unsubstantiated insistance that the courts are authorized to appropriate the customer's private property for them.
The truth of the matter is, it is the customer's right to determine who is entitled to his tip. When customers are deprived such rights, those worker who are presented tips cannot protect the tips they have been given and employers are free to benefit themselves to the tips. When the courts allow employers to mandate or require tip pooling they are authorizing employers to strip those workers who personally receive tips of their right and ability to protect the tips they have been given.
How do you put limits on how stolen property is distributed? When you suggest that limits should be put on tip pooling, what you are neglecting to understand is that, as the sole property of the employee who was paid, given or left the tip, the employee cannot be restricted as to whom he may share his tips with. What you seem to be suggesting is that employers, rather than employees, should be limitted as to whom they share their worker's tips with. Does that really make sense to you?
ReplyDeleteThe thing is, when tip pooling is correctly understood as the right of an employee, who has personally been presented a tip, to share his tip with whom-ever he chooses, there is no need to limit who may be included in a tip pool. California labor code is silent on who may be included in a tip pool except for it's statement that no employer or agent of the employer shall receive any part of the gratuities.
I believe that California Labor code substantiates the fact that an employee who personally receives tips from patrons is free to pool or share his tips with anyone he chooses, other than an employer or an agent of the employer.
The problem California has created is, now, instead of tip pooling being correctly viewed as the right an employee, who has been given a tip, to share his tip with whom-ever he chooses, tip pooling is being viewed as the right of the court's to share the employee's tips with whom-ever they choose. While an employee who is given a tip is clearly authorized to use his tip for what-ever purposes he chooses, the courts have not been authorized to use the customer's tip for their purposes.
My point is, when you attempt to limit who may be included in a tip pool, you are infringing on the rights of those whom state laws proclaim tips are the sole property of. By limiting employers and their agents from receiving any part of the gratuities, you are not really infringing on the rights of the employees, but rather, insuring that the public's tip is protected from the over-reaching hands of employers.
There should be no limits on who may be included in a tip pool other than those spelled out in California labor code. Just as there should be no limits on who may be included in a tip pool, there should be no allowances on who may be included in a tip pool. We are talking about private property here. You cannot allow others to entitle themselves to someone else's property. Likewise, you cannot limit an employee from entitling other to a share of his property.
The whole misunderstanding stems from the fact that the courts have refused to view employer mandated tip pooling as the taking or collecting of tips California labor code has prohibitted. It should not be that hard to understand that when an employer mandates tip pooling he is taking or collecting gratuities.
When employers mandate tip pooling, they are the ones who determine who will be included in the sharing of such money. They are the ones who determine how much each participant will receive from the pool. How can it be suggested that an employer who mandates tip pooling is not collecting or taking the gratuities when clearly he is the one who will determine how such funds are used.
ReplyDeleteThe courts seem to think that they can cover up the fact that an employer who mandates tip pooling is unlawfully controlling property that does not belong to him. By suggesting that the courts are limiting how employers use the customer's tip, employers are exhonerated from any claims that they are illegally appropriating the customer's tip without his consent.
The truth of the matter is, the courts are not governing how employers will use the customer's tip when employers mandate tip pooling. While the courts have ambigously set rules for who may be included in an employer mandated tip pool, they have neglected to instruct employers on the exact percentage each empployee included in the pool should receive. Clearly the courts are allowing employer to decide what percentage each employee included in an employer mandated tip pool should receive. What such insight clarifies is that the courts have allowed employers to collect and take the gratuities paid, given or left by patrons.
What I don't understand is why the courts seem to focus on tips left by patrons rather than focusing on tips given by patrons. California labor laws which concern tips explain that the intent of the law is "to prevent fraud on the public in conection with the practice of tipping.
ReplyDeleteFederal regulations state that "A tip is a sum presented by a customer as a gift or gratuity in recognition of some service performed for him" Money, simply left at a restaurant, doesn't seem to fit the requirements of a tip. Ovbiously a patron who simply leaves some money lying around is not recognizing some service proformed for him. The money is undesignated. Is it anyones fault, other than the customer, if the workers do not get the money carelessly left at a restaurant?
The courts seem to be more concerned about protecting customers who careless leave amounts of money lying around rather than protecting those who want to tip certain individuals.
My point is, the courts should not focus on money carelessly left undesignated, they should focus on tips which are paid or given to an employee and which are designated.
I do not believe that California labor laws where enacted to protect the public who careless leaves their money lying around, but rather the laws where enacted to protect those customer who want to recognize the service of an employee.
I think the courts should refrain from attempting to guess at who customers might intend to tip and start looking at whom customers actually present their tip to. In the case of the waitress and the busboy. Who is handling the check? If it is the waiter, then the customer is presenting the waiter a tip when he includes a tip on the bill. My point is, many customers would rather choose, for themselves, who they are tipping than have the courts choose for them.
I believe THAT the courts responsibility to the public is to insure that they have every opportunity to choose, for themselves, who they are tipping. A good place to start would be to prohibit the use of tip jars which either intentionally or mistakenly have no names printed on them and which leave the customer no opportunity or ability to choose who they wish to tip. Another way to insure that the public has the opportunity to designate who their tip is intended for would be to prohibit employer mandated tip pooling. When employers are allowed to share the customer's tip among a group of workers, the customer is deprived his right and ability to determine who should be entitled to his tip.
I just don't understand why the courts are so insistent on protecting customers who obviously have little regard for who should receive their tip. Why aren't the courts concentrating their efforts on protecting the customers who want their tip protected as the property of the person to whom they have choosen to tip?
One good reason for why the Leighton ruling should be overturned.
ReplyDeleteLeighton observed that “the legislative intent reflected in the history of the statute, was to ensure that employees, not employers, receive the full benefit of gratuities that patrons intend for the sole benefit of those employees who serve them.”
While the courts recongized the fact that the legislative intend of Califronia labor code 351 was to ensure that the employees, rather than the employer, receive the full benefit of the gratuities that patrons intend for the sole benefit of those employees who serve them, following are articles explaining exactly how the pooling of tips can create a benefit for employers. What these articles all clarify is that when an employer is allowed to require tip pooling he can reduce his payroll costs and subsuquently save himself money. While these articles address the most beneficial scenario. where both tip pools and tip credits are available to the employer, the articles clearly explain how, even when no tip credit is taken, tip pools can be utilized to financially benefit the employer.
Employer mandated tip pooling allows employers to reduce their labor costs via the tips customers present their employees. The money that is being used to reduce such labor costs and which ultimately is creating a financial benefit for such businesses is coming from their employee's tips.
I do not beieve employers should be allowed to benefit themselves to their worker's tips. Employer mandated tip pooling is a tried and proven means for employer to benefit themselves to their worker's tips. I do not understand why the courts of California are allowing employers to mandate tip pooling when there is documented proof that an allowance of such acts clearly provide employers with a means to benefit themselves to the tips customers present their workers.
Restaurant owners reduce costs through credits and tip pools
http://www.bizjournals.com/ct/c/590571
Tipping the scales in restaurateurs' favor: tip credit, pooling can reduce labor costs
http://findarticles.com/p/articles/mi_m3190/is_29_38/ai_n6124187/
Use Caution in Managing Payroll Costs through Tip Credits and Tip Pooling
http://www.sandsanderson.com/our_work/article_tip_pooling.html