Labor Code Section 351 prohibits employers and their agents from sharing in or keeping any portion of a gratuity left for or given to one or more employees by a patron.
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Wage and Hour Update
Tip Pooling Not
Limited To Restaurants
Careful Who Shares In the Pool!
By Christopher W. Olmsted
Tip pooling is the practice of taking customer gratuities and dividing the money among employees. In California, the practice is allowed, but particular rules apply, including the prohibition against supervisor participation.
California courts have allowed the practice to take place in restaurants. Is tip pooling allowed in other contexts? A California appellate court answered the question in the context of a casino in a case titled Lu v. Hawaiian Gardens Casino.
Louie Lu, a former casino dealer, brought a class action against Hawaiian Gardens Casino. He challenged the legality of the casino’s policy requiring dealers to contribute part of the gratuities they receive to a tip pool for employees who provide service to casino patrons. He claimed that the policy violated Labor Code Section 351.
The General Rule
Labor Code Section 351 prohibits employers and their agents from sharing in or keeping any portion of a gratuity left for or given to one or more employees by a patron.
Furthermore it is illegal for employers to make wage deductions from gratuities, or from using gratuities as direct or indirect credits against an employee’s wages. The law further states that gratuities are the sole property of the employee or employees to whom they are given. "Gratuity" is defined in the Labor Code as a tip, gratuity, or money that has been paid or given to or left for an employee by a patron of a business over and above the actual amount due for services rendered or for goods, food, drink, articles sold or served to patrons. It also includes any amount paid directly by a patron to a dancer covered by IWC Wage Order 5 or 10.
Pooling Not Limited To Restaurants
California cases address tip pooling in the context of restaurants, but not casinos. Mr. Lu argued that unlike restaurants where tips are left on the tables, in casinos, gratuities are handed directly to dealers, with the result that such gratuities belong solely to the dealers.
The trial court granted judgment in favor of the casino, finding, as a matter of law, that the casino’s mandatory tip pooling policy did not violate these statutes.
The appellate court agreed. It held that nothing in Labor Code section 351 prohibits tip pooling in casinos. The court determined that an employee may sue for a violation of section 351, indirectly by alleging a violation of California’s Unfair Competition Law.
Supervisors’ Participation Illegal
Nevertheless, the appellate court determined that the trial court erred by granting summary judgment. There was a dispute in the evidence as to whether some of the tip pool recipients were supervisory “agents” in violation of section 351.
Learn More
Employers at establishments where customers leave tips should carefully examine California’s rules regarding tips and tip pooling. For more information on this topic, please see these previous articles on our firm’s website:
Tips and Gratuities
http://www.barkerolmsted.com/news/legal-updates/newsletter0028.php
Court Serves a Bitter Brew to Coffee Chain; $105 Million Awarded in Tips Case
http://www.barkerolmsted.com/news/legal-updates/newsletter0029.php
More Legal Update articles.
Download entire March Legal Update in PDF format.
This article is intended as a brief overview of the law and are not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2009 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved.
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