54 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com rather was intended to prevent employers from using tips as a method of paying employees sub-minimum wages; (2) Section 351 makes no mention of tip-pooling among co-workers; and (3) tip-pooling has been around a long time, so the presumption should be that the California Legislature would have been explicit if it had wanted to outlaw the practice.266 A 2005 DLSE opinion letter did suggest that it is inappropriate for an employer to include in the tip pool those employees who do not provide “direct table service.”267 But even that opinion places “bartenders” in the category of employees who provide “direct table service,” and cites only dishwashers, cooks, and chefs as examples of employees who should not be included in the tip pool. Moreover, the DLSE has apparently retreated from that position. A more recent DLSE opinion letter states that tip pools may include anyone in the “chain of service,” which is an undefined term that presumably would include anyone who provides any service to clients (e.g., bartenders making their drinks).268 The sudden tide of tip-pooling cases was stemmed by the issuance of a lengthy and persuasive federal district court opinion, Louie v. McCormick & Schmick Restaurant Corp.269 Louie held that Section 351 allows management to force servers to share tips with other employees who provide any service to customers at all (whether or not at the patron’s table). Following Louie, trial courts handling the other cases filed at the same time all reached the same conclusion and dismissed tip-pooling cases. Post-Louie California appellate courts appear to have slain this species of tip-pooling action altogether. Three decisions in early 2009—Lu v. Hawaiian Gardens Casino, Inc.,270 Budrow v. Dave & Buster’s of California, Inc.,271 and Grodensky v. Artichoke Joe’s Casino272—confirmed that Section 351 does not preclude forced sharing of tips with other non-management employees. Meanwhile, in Etheridge v. Reins International California, Inc., the Court of Appeal resolved the remaining issues in the employer’s favor when it held that management can mandate that tips be shared with any employee who “contributes” to a patron’s service, which arguably could include cooks and kitchen staff as well as bartenders.273 266 Id. at 1067-68. 267 DLSE Opinion Letter 1998-12-28-1 at 2-3. 268 DLSE Opinion Letter 2005-09-08 at 2. 269 460 F. Supp. 2d 1153 (C.D. Cal. 2006) (Seyfarth Shaw case). 270 170 Cal. App. 4th 466, 479 (2009) (“In its analysis of Labor Code Section 351, the legislative history, and related statutes, Leighton’s statements were not restricted to restaurants”), aff’d, 50 Cal. 4th 592 (2010). 271 171 Cal. App. 4th 875, 878 (2009) (Seyfarth Shaw case; noting that “section 351 does not distinguish between the various functions that restaurant employees perform”). 272 171 Cal. App. 4th 1399 (2009), disagreed with by Lu v. Hawaiian Gardens Casino, Inc., 50 Cal. 4th 592 (2010) (holding § 351 does not authorize a private right to sue, contrary to the holding in Grodensky). 273 172 Cal. App. 4th 908 (2009); Indeed, in the Consolidated Appropriations Act of 2018, Congress amended FLSA § 3(m) to withdraw certain regulations (§§ 531.52, 531.54, and 531.59); as a result, employers that pay the full federal minimum wage are no longer prohibited from allowing employees who are not “customarily and regularly” tipped to participate in tip pools.
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