No Private Right of Action on Tip Sharing Claims

The California Supreme Court has ruled that an employee has no private right of action against an employer for violations of Labor Code § 351, but that plaintiffs could seek remedies such as common law claims for conversion for violations of section 351. Lu v. Hawaiian Gardens Casino Inc. (2010) __ Cal.4th__.

Labor Code § 351 prohibits employers from taking any gratuity patrons leave for their employees, and declares that such gratuity is “the sole property of the employee or employees to whom it was paid, given, or left for.”  A number of Courts of Appeal have held that this prohibition, at least in the restaurant context, does not extend to employer-mandated tip pooling, whereby employees must pool and share their tips with other employees.

Here, the casino’s policy required dealers to contribute 15 to 20 percent of their tips to a tip pool to be shared among other designated employees who provided service to casino patrons. The dealer alleged that this policy constituted a conversion of his tips and violated, among other provisions, section 351. In 2002, he brought this case as a class action. The trial court granted the employer's motion for judgment on the pleadings on the causes of action based on sections 351 and 450, holding that neither section contained a private right to sue. The court also granted the Casino’s successive motions for summary adjudication on the remaining causes of action. The employee appealed.

The Court of Appeal agreed that section 351 does not itself contain a private right to sue. Less than two months later, another Court of Appeal expressly disagreed with the holding on section 351 of the appellate court below.  (Grodensky v. Artichoke Joe’s Casino (2009) 171 Cal.App.4th 1399, review granted June 24, 2009, S172237.)  The Supreme Court granted review to resolve the conflict on this narrow issue.

The Supreme Court resolved the conflict in favor of employers, holding that "there is no clear indication that the Legislature intended to create a private cause of action under the statute." The Supreme Court's decision is consistent with a prior federal case, Matoff v. Brinker Restaurant Corp. (C.D. Cal. 2006) 439 F.Supp.2d 1035, which also held that section 351 contained no private right of action. Nonetheless, to the extent that an employee may be entitled to certain misappropriated gratuities, the court sees

"no apparent reason why other remedies, such as a common law action for conversion, may not be available under appropriate circumstances.  (See Moradi-Shalal, supra, 46 Cal.3d at pp. 304-305 [even without private cause of action under statute, “courts retain jurisdiction to impose civil damages or other remedies . . . in appropriate common law actions”]; see also Civ. Code, § 3523 [“For every wrong there is a remedy”].)   Likewise, “nothing we hold herein would prevent the Legislature from creating additional civil or administrative remedies, including, of course, creation of a private cause of action for violation of” section 351.  (Moradi-Shalal, supra, 46 Cal.3d at p. 305.)"

The court expressed no view on whether tip pooling is permissible under section 351 and did not address the issue of whether section 450 carries with it a private right of action. The court also made no mention of the Private Attorney General Act (PAGA). Presumably, violations of section 351 can still be pursued under the PAGA.

You can download the full opinion in Lu v. Hawaiian Gardens Casino here in Word or PDF.

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