Litigating California Wage & Hour and Labor Code Class Actions

alleged that “agents” of the employer unlawfully took employees’ tips. In 2010, the California
Supreme Court held in Lu v. Hawaiian Gardens Casino, Inc. 156 that Section 351 does authorize a
private right to sue. Although this decision was certainly a victory for employers, it does not
necessarily mean the end of tip-pooling actions.
A. Actions Alleging Tips Were Diverted to Co-Workers Who Did Not
Earn Them
In 2006, some twenty separate class action lawsuits were filed in quick succession alleging
a claim for “tip-pooling violations” against various restaurants and restaurant chains in
California. The underlying theory in the cases was that when a customer leaves a tip for a
server at a restaurant table, the employer may not require the server to share the tip with
bartenders who do not provide “direct table service” to the customer who left the tip. This
alleged prohibition on certain tip-pooling arrangements is purportedly derived from Labor
Code Section 351, which bars an employer from “tak[ing], collect[ing] or receiv[ing] any
gratuity or a part thereof” left for a server, or from using such tips as a credit against the
state minimum wage.
This wave of lawsuits was unexpected, given that a published case from the 1990s,
Leighton v. Old Heidelberg, Ltd., 157 expressly held that Section 351 does not preclude tippooling
among restaurant employees. Moreover, the tip-pooling arrangement approved in
Leighton required that servers share tips left at the table with both the busboy and the
bartender, and there was no suggestion anywhere in the case that the bartender had
provided “direct table service.” Nonetheless, the “direct table service” notion derives from
one rationale for finding tip-pooling lawful and consistent with public policy:
[T]he restaurant business has long accommodated this practice which, through
custom and usage, has become an industry policy or standard, a ‘house rule and
is with nearly all restaurants,’ by which the restaurant employer, as part of the
operation of his business and to ensure peace and harmony in employee
relations, pools and distributes among those employees, who directly provide
table service to a patron, the gratuity left by him, and enforces that policy as a
condition of employment. 158
The plaintiffs in these tip-pooling cases contended this language meant that only those
who provide direct table service may share in the tip pool. Employers responded by
pointing to the fact that Leighton approved a pool that included bartenders, and that this
gloss on Leighton ignores other statements by the court that suggest that its holding was
156
157
158
50 Cal. 4th 592 (2010).
219 Cal. App. 3d 1062 (1990) (emphasis added).
Leighton, 219 Cal. App. 3d at 1067.
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