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California Supreme Court Rejects Employees Right to Sue for Misappropriated Tips But An Unfair Competition Law Cause of Action Remains

Written by Littler Mendelson Tuesday, 24 August 2010 00:00

Introduction : On August 8, 2010, the California Supreme Court, in Lu v. Hawaiian Gardens Casino, No. S171442, decided that employees do not have a private right of action under Labor Code section 351 to pursue remedies for misappropriated tips. However, the California Supreme Court did not decide nor prevent an unfair competition law

(UCL) cause of action predicated on Labor Code section 351. The exposure of a UCL cause of action against employers for providing tips to "agents" of the employer remains. As stated in our April 2009 ASAP, California Appellate Court Protects Employers Who Allow Tips for Dishwashers, California restaurant and service employers whose employees receive tips should review and maintain proper tip-pooling policies.

Factual & Procedural Background

California Labor Code section 351 provides that a tip is the sole property of the employee to whom it was paid and not the employer or manager.

Plaintiff Louie Hung Kwei Lu (Lu) was employed as a card dealer at defendant Hawaiian Gardens Casino, Inc. (the Casino), from 1997 to 2003. The casino had a written tip-pooling policy that required dealers to set aside 15 to 20 percent of the tips they received on each shift. The dealers kept the remaining 80 to 85 percent of the tips received; the casino did not deduct these sums from the minimum hourly wages the dealers earned. The casino deposited the pooled tips into a "tip pool bank account" and later distributed the money to designated employees who provided service to casino customers. These employees included chip service people, poker tournament coordinators, poker rotation coordinators, hosts, customer service representatives or "floormen," and concierges. The tip pool policy specifically prohibited employers, managers, and supervisors from receiving any money from the tip pool.

By:: Matthew Marca; Guissu Raafat for Littler Mendelson

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Author of this article: Littler Mendelson

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