California Supreme Court Limits Tip Pooling Remedies

by Fred Plevin
Paul, Plevin, Sullivan & Connaughton LLP

On August 9, 2010, the California Supreme Court ruled that employees have no private right to sue under Section 351 of the California Labor Code, which governs how employees’ tips and gratuities must be handled.  Specifically, Section 351 prohibits employers from taking any tips patrons leave for their employees, and provides that tips are “the sole property of the employee or employees to whom it was paid, given or left for.”

The case, Lu v. Hawaiian Gardens Casino, was brought by a card dealer who challenged the casino’s tip pooling policy, which required dealers to contribute 15 to 20 percent of their tips to a pool shared among other designated employees.  

Affirming the lower court ruling, the California Supreme Court held that Section 351 does not extend to employer-mandated tip pooling where employees must share their tips with other employees.  In addition, the court examined the legislative history of the statute and concluded that the Legislature had not intended to include a private right to sue in the law. 

Rather, the court concluded, the text of the statute “simply affirmed what courts had ‘long held’: that gratuities ordinarily belonged to the waiter or waitress absent a contrary agreement. It did not reflect a legislative intent to give employees a new statutory remedy to recover any misappropriated gratuities.”

The court noted that the ruling did not necessarily bar employees from seeking other remedies, even other remedies in court.  Specifically, the court stated that “[t]o the extent that an employee may be entitled to certain misappropriated gratuities, we see no apparent reason why other remedies, such as a common law action for conversion, may not be available under appropriate circumstances.”


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