Employees Cannot Sue Under Labor Code 351 for Alleged Tip Pooling Violations
Today the California Supreme Court issued its decision in Lu v. Hawaiian Gardens Casino, holding that Labor Code section 351 does not provide private litigants a direct right to sue for an alleged taking of their gratuities by their employer.
The Lu case is a tip pooling case, in which the plaintiff alleged that his casino employer unlawfully required the plaintiff to contribute 15-20% of his tips to a tip pool that was then distributed among various employees. The plaintiff alleged that the tip pooling arrangement violated Labor Code section 351, which mandates that tips are the property of the employee for whom they are left. The trial court and the appellate court both held that the plaintiff's Labor Code section 351 claim was not a viable claim because there is no private right to sue to enforce that provision. This holding conflicts with another California appellate court decision, Grodensky v. Artichoke Joe's, which held that Labor Code section 351 does provide a private right of action.
The California Supreme Court granted review to resolve the narrow issue of whether Labor Code section 351 provides a private right of action. The Court answered this question in the negative, reasoning that neither the express language of the statute nor the legislative history reveals that a private right of action was created. The Court rejected the plaintiff's argument that this leads to an absurd result because employees are arguably left without a vehicle to enforce violations. The Court stated that in appropriate circumstances, employees can still pursue a tort claim for conversion and/or the Legislature was free to amend the Labor Code to add a private right of action.
The Court made clear that its opinion was limited to the issue of whether a private right of action exists under section 351. The Court expressed no opinion on the lawfulness of tip pooling arrangements or the parameters for tip pooling plans.
Although the Lu opinion is a positive development for employers, it should not be interpreted as eliminating the ability of employees to sue for alleged tip pooling violations. Employees may still bring suit under California's Unfair Competition Law and/or under a tort theory such as conversion. However, the remedies are different than those available under the Labor Code and , significantly, employees do not have the same ability to recover attorneys' fees in such a lawsuit as they do in cases brought under the Labor Code.