In Lu v. Hawaiian Gardens (2010), the California Supreme Court determined that employees do not have a private cause of action to recover their gratuities (tips) under Labor Code Section 351. The decision creates some uncertainty about enforcement of tips under the Labor Code.
Lu, the employee who brought the lawsuit, was a dealer in a casino. He objected to the casino requiring him to share 15-20% of his tips with fellow employees like hosts, customer service representatives, “floormen,” and concierges. Lu sued under Labor Code Section 351 contending that the tip pooling was depriving him of the tips he earned. He also contended that his employer violated the Unfair Competition Law, Business and Professions Code 17200, by requiring the tip pooling among people who might qualify as agents of management.
The Supreme Court focused on whether the employee had a right to sue to recover the tips, commonly referred to as a private right of action. It examined the Legislative history of Labor Code Section 351 and noted that an employer is subject to a criminal penalty (a misdemeanor) and fines for taking an employee’s tips under that section. It noted that the Department of Industrial Relations has the authority to enforce Labor Code Section 351. The Court determined that it did not provide Lu with a private cause of action.
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