California Supreme Court Schedules Oral Arguments In Cases Of Potential Interest To Employers

By Christopher S. Andre

The California Supreme Court has scheduled for oral argument two cases of potential interest to employers:

On May 25, 2010, the Court will hear oral arguments in Lu v. Hawaiian Gardens Casino. The issue to be decided in that case is whether "Labor Code section 351, which prohibits employers from taking 'any gratuity or part thereof that is paid, given to, or left for an employee by a patron,' create a private right of action for employees?" In other words, the Court will decide whether a current or former employee can personally sue his or her current or former employer for alleged violation of Labor Code section 351.

On June 2, 2010, the Court will hear oral arguments in Clark v. Superior Court. Although the issue to be decided is whether statutory penalties for violations of California's elder abuse laws are recoverable as restitution under California's Unfair Competition Law ("UCL") codified at California Business and Professions Code section 17200, et seq., the case is potentially of interest to California employers because the California Labor Code provides for a variety of penalties, and it is currently understood that such penalties are not recoverable as "restitution" under the UCL. If the Court holds that statutory penalties for violations of California's elder abuse laws are recoverable as restitution under the UCL, that might pave the way for plaintiff current or former employees to argue that Labor Code penalties are likewise recoverable under the UCL.

We will report on any further significant developments in these cases as information becomes available.

Ninth Circuit Decision Clarifies Tip Pooling Rules Under Federal Law: A Cautionary Tale

By Christopher S. Andre and Scott K. Dauscher

On February 23, 2010, in Cumbie v. Woody Woo, Inc., the Ninth Circuit Court of Appeal held that an employer that pays its wait staff a wage greater than the minimum wages does not violate the Fair Labor Standards Act ("FLSA") by requiring its wait staff to participate in a tip pool that redistributes approximately 55% to 70% of their tips to employees who are not customarily tipped, such as dishwashers and cooks.

The Ninth Circuit agreed with the trial court there was no violation of the FLSA because the FLSA does not restrict which employees may share in a tip pool so long as the employer does not apply a portion of an employee's tips toward payment of the Federal minimum wage, and Woody Woo paid its wait staff wages greater than the Federal minimum wage. On the other hand, when an employer does take such a "tip credit," tips can be distributed only to employees "who customarily and regularly receive tips."

We refer to the decision as a cautionary tale because California employers are subject to both Federal law and California law, which frequently overlap. When Federal law and California law overlap, an employer is generally required to comply with the law that is most favorable to the employee. An employment practice lawful under Federal law might violate California law and vice versa. For example, while the FLSA permits an employer in some circumstances to apply a portion of an employee's tips toward payment of the Federal minimum wage, California Labor Code Section 351 forbids that practice entirely.

Click here to download and read the decision.

Click here to download and read the Fair Labor Standards Act

Click here to download and read California Labor Code Section 351.