California Supreme Court Holds No Private Right of Action Re: Tip Pooling

Labor Code Section 351 provides that tips belong to the servers who generate them. Tip pooling - employer-mandated sharing of tips among service staff, has been held lawful under that section. But certain tip pooling arrangements, particularly those in which management shares tips, have been held illegal.

In Lu v. Hawaiian Gardens Casino, Inc., a card dealer sued over a tip pooling arrangement, claiming that the employer's policy violated section 351. The lower courts held that Section 351 does not authorize private lawsuits. The Supreme Court stepped in to resolve a split in the courts of appeal. Applying general principles regarding when the Legislature intends to create private causes of action, the Court held there was none authorized under Section 351.
Of course, the plaintiffs can pursue their unfair competition claims, etc. The main disadvantage I can see off the cuff is the absence of a claim for attorney's fees under the Labor Code.

This case does not address whether tip pooling itself is lawful. So, employers should continue to draft tip pooling arrangements in accordance with lower court decisions on the subject, such as Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062, 1067; Etheridge v. Reins Internat. California, Inc. (2009) 172 Cal.App.4th 908, 921-922; Budrow v. Dave & Buster’s of California, Inc. (2009) 171 Cal.App.4th 875, 878-884; and Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal.App.4th 138, 143.

The case is Lu v. Hawaiian Gardens Casino, Inc. and the opinion is here.