California Courts Address Tip Pooling Issues
July 12, 2009 by Beeson Tayer & Bodine
Tip pools are an increasingly common source of litigation in California. Labor Code section 351 provides that tips are the sole property of the person to whom they are given, and that the employer and its agents may not take tips left for employees. In several recent cases, courts have decided two important issues related to tipping: (1) whether plaintiffs who have been deprived of their tips have a private right of action under section 351; and (2) which employees may share in mandatory tip pools.
In two decisions issued this year, appellate courts have disagreed whether individual employees may enforce their rights to their tips by filing a lawsuit under section 351. Grodensky v. Artichoke Joe’s Casino, 91 Cal. Rptr. 3d 732, the court said they may, but in Lu v. Hawaiian Gardens Casino, Inc., 88 Cal. Rptr. 3d 345, the court rules they may not. This conflict will eventually be resolved by the California Supreme Court, which has granted petitions for review in these two cases. Even if the court finds that there is no private right of action under section 351, it will probably still be possible for individuals to file suit to recover for tips unlawfully taken under Business and Professions Code section 17200, commonly known as the Unfair Competition Law.
Recent cases have found that section 351 allows mandatory tip pools with employees who do not directly serve patrons at tables, such as bartenders, bussers, kitchen staff and dishwashers. For example, a tip pool that required cocktail servers to contribute 1% of their gross sales to bartenders and other employees was held legal in Budrow v. Dave & Buster’s of Cal., Inc., 171 Cal.App.4th 875 (2009). Another decision ruled that a tip pool is legal so long as all employees in the pool contribute to the patron’s service, no matter whether they come into direct contact with clients at the table. Etheridge v. Reins International Cal., Inc., 172 Cal. App. 4th 908 (2009).
One class of employees may be prohibited from participating in tip pools – “agents” of the employer. Managers and supervisors are “agents” and cannot participate in tip pools with employees if they have authority to direct or control the employees, or if they have the power to hire and fire. Occasionally directing someone to do something does not make a person an agent under the statute. However, the Fourth District Court of Appeal recently reversed a well-publicized $100 million dollar verdict against Starbucks, and found that agents can participate in tip pools under certain circumstances. In Chau v. Starbucks Corp. 174 Cal. App. 4th 688 (2009), the court held that if a patron leaves tips in a collective tip box, even agents may share in a mandatory tip pool, because it can be presumed the patron intended to leave the tip for a team of employees involved in service, including the supervisor. We anticipate an appeal to the California Supreme Court in this case.
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