The California Supreme Court struck a blow to wage and hour class action lawsuits by holding that Labor Code Section 351, which prohibits California employers from taking gratuities left for employees, does not provide a private cause of action allowing employees to sue their employers.
In Lu v. Hawaiian Gardens Casino, Inc., a card dealer brought a class action suit against his casino employer, challenging the casino’s written policy requiring dealers to pool 15-20% of their tips and share them with other designated employees. The plaintiff alleged that this was an illegal misappropriation of his tips by the employer in violation of Section 351. The trial court dismissed the Section 351 cause of action, however, declaring that the statute did not provide the plaintiff with a private right to sue.
The Court of Appeal affirmed the trial court’s ruling, a holding which was expressly contradicted two months later by another appellate court in Grodensky v. Artichoke Joe’s Casino.
Because of the conflict between the appellate courts, the Supreme Court granted review in Lu to resolve the issue of whether Section 351 confers a private right of action. The Court, however, specifically stated that it was not expressing an opinion as to the permissibility of tip pooling under Section 351.
In its decision, the Lu Court initially noted that a violation of a state statute does not necessarily give rise to a private cause of action and that a party’s ability to sue depends on the intent of the Legislature. The Court concluded that neither the language of Section 351 nor the legislative history of the statute reveals an intent to create a private right for employees to sue their employers. Rather, the responsibility of enforcement of Section 351 is vested with the Department of Industrial Relations.
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