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Tip Pooling in Casinos

The Second District Court of Appeal in Los Angeles has ruled that casinos may insist on tip pooling among their employees, but found that the Hawaiian Gardens Casinomay have violated the ban on participation in tip pools by supervisors. Lu v. Hawaiian Gardens Casino, Inc., Case No. B194209 (Jan. 22, 2009). We previously wrote about tip pooling in this blog on July 6, 2008, in our report on the Starbucks settlement with its baristas.

Labor Code section 351 prohibits employers from taking tips or crediting tips toward minimum wage obligations. However, under a 1990 Court of Appeal decision, employers may insist that employees pool their tips so that all are treated fairly. Leighton v. Old Heidelberg, Ltd., 219 Cal.App.3d 1062 (1990). That decision explained: “To the contrary, the restaurant business has long accommodated this practice which, through custom and usage, has become an industry policy or standard, a “house rule and is with nearly all Restaurants,” by which the restaurant employer, as part of the operation of his business and to ensure peace and harmony in employee relations, pools and distributes among those employees, who directly provide table service to a patron, the gratuity left by him, and enforces that policy as a condition of employment.”

The Hawaiian Gardens Casino dealers argued in their class action lawsuit that the rule permitting tip pooling should not apply to them because the tips were handed directly to them, and were not intended to be left for all the employees in the casino who provided service. The court rejected the argument. “As in restaurants, a tip pool in a casino promotes good service among all of the employees who come in contact with the patron, which enhances the casino’s reputation and increases its business.”

However, that did not get the casino out of the lawsuit. There was evidence that some of those who participated in the tip pool acted in a supervisory capacity by participating in evaluations and by directing and advising dealers on their conduct. That would make such employees “agents” who are barred by section 351 from receiving any tip money.

Although there is no private right to sue under section 351, any violation of the statute may form the basis for a claim under the Unfair Competition Law, Business and Professions Code section 17200.