Litigating California Wage & Hour and Labor Code Class Actions

In the appeal of Chau, the appellate court held that “shift supervisors” at Starbucks – who
performed the same work as regular employees 90 percent of the time, lacked any
authority to discipline, and were not considered by the company to be part of
“management” – could get a share of the tips. 171 It should be noted that the decision
distinguished itself from “tip-pooling” cases because the tips in question were left in
collective tip jars, making this instead a “tip apportionment” case because the tips are
already “pooled.” 172 The court held that in this kind of case it is presumed the patron
intends for the tip to be shared by the entire service “team,” particularly in light of the fact
that it is probably difficult for the average patron to distinguish between those who are “shift
supervisors” and those who are not. 173 While this decision was a significant victory for
employers, the specific circumstances of the case mean that it should not be interpreted to
suggest that supervisors with the powers normally attributed to managers (power to
discipline, hire and fire, and give commands, etc.) may share in a traditional “tip pool.” It is
unclear whether Section 351 was intended to preclude the supervisor from receiving tips in
the situation where the tips were actually left for the supervisors.
C. The Future of Tip-pooling Cases Under California Law
Although it has now been clarified that certain types of tip-pooling arrangements are
permissible under California law, there remained a dispute about whether Section 351
contained a private right of action that allowed plaintiffs to sue under the statute at all. This
dispute was finally put to rest in 2010 when the California Supreme Court decided Lu v.
Hawaiian Gardens, Inc. There, the Court held that no private right of action to sue exists
under Section 351, foreclosing any future tip-pooling cases under that statute. 174 What the
Court did not do, however, is foreclose the possibility of tip-pooling cases altogether. The
Lu Court specifically found that if an employee is entitled to misappropriated gratuities, the
employee could collect them under other legal theories, e.g., conversion. 175 A plaintiff could
also, most likely, recover such monies as restitution under California’s Unfair Competition
Law or recover penalties for the violation under Labor Code Section 203, Section 226, or
PAGA.
171
172
173
174
175
174 Cal. App. 4th 688 (2009).
Id. at 700.
Id. at 705.
50 Cal. 4th 592 (“there is no clear indication that the Legislature intended to create a private cause of action under the
statute”).
Id. at 603-04 (“holding that section 351 does not provide a private cause of action does not necessarily foreclose the
availability of other remedies”).
Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 43