California Employment Law Letter
AGENCY ACTION
Back wages collection tops $185 million. The
U.S. Department of Labor’s (DOL) Wage and Hour
Division announced its enforcement data for fiscal year 2008 in January, showing that it recouped
back wages totaling more than $185 million for
228,645 workers.
The Wage and Hour Division is responsible for
administering and enforcing labor laws, including
the minimum wage, overtime, and child labor provisions of the Fair Labor Standards Act, the Family
and Medical Leave Act, the Migrant and Seasonal
Agricultural Worker Protection Act, worker protections provided in several temporary visa programs,
and the prevailing wage requirements of the DavisBacon Act and the Service Contract Act.
Publication aimed at helping small employers understand 401(k) automatic enrollment. The
DOL and the IRS have released a publication to
help small employers understand automatic enrollment for 401(k) plans offered to their employees.
The publication describes an automatic enrollment plan, how to set it up, management of
the plan, fiduciary responsibilities, and a checklist
to ensure compliance with the law. The booklet
and other materials are available by calling the
Employee Benefits Security Administration at (866)
444-3272 or by visiting the website at www.dol.
gov/ebsa.
OSHA proposes rule on exposure to diacetyl.
The Occupational Safety and Health Administration (OSHA) has proposed a rule on occupational
exposure to diacetyl and food flavorings containing diacetyl.
The proposal seeks public comments on issues related to occupational exposure to diacetyl
and food flavorings containing it, including the
relationship between exposure to diacetyl and the
development of adverse health effects, methods to
evaluate and monitor exposure, methods to control exposure, employee training, medical observation for adverse health effects related to diacetyl
exposure, and related topics. The proposal was
published in the January 21 Federal Register, with
comments to be accepted for 90 days.
engage in an interactive process when the employee later was
accommodated. Contrary to that argument, failure to engage
in the interactive process is a separate FEHA violation from
an employer’s failure to provide a reasonable accommodation.
The appellate court found that BART ended Bartley’s work as
an SSW without engaging in any meaningful interactive process with him, and the fact that it eventually corrected its error
was irrelevant. San Francisco Bay Area Rapid Transit District v.
Fair Employment and Housing Commission (California Court of
Appeal, First Appellate District, unpublished, 1/21/09).
Bottom line
Failing to engage in the interactive process and failing to
provide reasonable accommodations are two separate, independent violations under the FEHA. Your first obligation is to participate in an interactive dialogue with the employee regarding
possible accommodations. Unilaterally placing an employee on
administrative leave without first evaluating whether any accommodations would allow the employee to perform his job
violates the FEHA.
The author can be contacted at Freeland Cooper & Foreman LLP
in San Francisco, [email protected]. ✤
WAGE AND HOUR law
House doesn’t always win: Court
permits unfair competition
claims against casino
by Carmen J. Cole
The California Court of Appeal, Second Appellate District, has
concluded that card dealers may proceed with Unfair Competition Law
(UCL) claims based on Labor Code Section 351 when they’re required
to share tips from tip pools with managerial employees.
Casino required tip pooling
Enforcement agency touts year’s convictions, indictments, payments. The DOL’s Office
of Labor-Management Standards has announced
its criminal enforcement data for December 2008:
six convictions, nine indictments, and payments or
orders of restitution totaling more than $57,700.
Labor Code Section 351 prohibits an employer from forcing
service employees to share tips with the employer or its agents.
The Hawaiian Gardens Casino had a written tip-pooling policy
requiring dealers to share between 15 and 20 percent of their
earned tips at the end of each shift. The casino deposited the
money into a “tip pool bank account” for distribution to employees who provide services to customers, such as chip runners, coordinators, hosts, concierges, and customer service
representatives. Supervisors were expressly excluded from receiving pool distributions.
The December results bring the 2008 total
payments or orders of restitution to $1,585,872.
The bulk of the cases involved the embezzlement of union funds. The agency’s cumulative
enforcement results from the beginning of fiscal
year 2001 include 1,004 indictments, 929 convictions, and payments or orders of restitution totaling
$93,110,576. D
Although classified as “customer service representatives,”
these employees were also referred to as “relief supervisors,”
and their job duties involved several managerial tasks, including
writing evaluations and generally overseeing dealer work performance. Louie Hung Kwei Lu, the representative of a class of
dealers employed by the casino, sued, alleging that because distributions were made to employees who performed managerial
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February 9, 2009
California Employment Law Letter
functions, the casino converted dealers’ wages, violated
Labor Code Section 351, and violated the UCL.
In another case, Leighton v. Old Heidelberg, Ltd, a court
of appeal upheld the legality of a tip-pooling arrangement by which a restaurant’s owner required wait staff
to share tips with bartenders and busboys. In that case,
the court held that because the employer wasn’t keeping
any money for itself, there was no Labor Code Section
351 violation. The dealers argued that the Leighton decision presented a different kind of case because it examined gratuities in the restaurant context in which tips
are left on the table, as opposed to in the casino industry
in which dealers receive tips directly from the customer.
The trial court rejected that distinction and dismissed
the lawsuit.
Court of appeal’s ruling
The court rejected the dealers’ attempt to distinguish
tip pooling in the casino industry from the restaurant
industry. First, there is nothing in the Leighton decision,
the legislative history of Section 351, or the policies underlying it demonstrating an intent to prohibit tip pools.
Second, the court determined that regardless of the industry, tip pooling has the “salutary effect” of promoting good service from all who share in the pool. The
purpose of Section 351, the court noted, is to prevent the
employer from collecting gratuities. The fact that employees, other than dealers, receive money from the tip pool
doesn’t undermine that purpose.
The court also rejected the dealers’ argument that a
private right to sue is available under Section 351. Section 351 is among the statutes enforced by the Division
of Labor Standards Enforcement (DLSE) and listed in the
Private Attorneys General Act (PAGA) allowing private
citizens to sue for penalties if the DLSE does not. The
enactment of the PAGA as an enforcement mechanism,
the court reasoned, renders a private right to sue under
this section not “viable.”
The dealers’ “conversion” claim was also rejected
because they had no right to possess the entire amount
of tips received under the casino’s policy. Thus, they
couldn’t satisfy the necessary element that they own or
have the right to possess the property at the time of the
conversion.
The court of appeal found, however, that a violation
of Section 351 may constitute an unfair business practice
under the UCL and that it was up to a jury to determine
whether such a violation occurred. The court explained
that if the customer service representatives were performing managerial functions in addition to their customer service functions, as the evidence suggested, they
were “agents” of the employer. Thus, any distributions
to them from the tip pool could violate Section 351 and
be an unfair business practice under the UCL. Lu v. Hawaiian Gardens Casino (California Court of Appeal, Second Appellate District, 1/22/09).
February 9, 2009
Bottom line
Casinos, like restaurants, may enforce tip-pooling
policies because the purpose of promoting good customer service is universal. Although there is no private
right to sue for a violation of Section 351, the statute may
be a predicate for suits under the UCL.
To protect against UCL suits predicated on Section
351, employers in service industries where tips are customary should inform employees at the beginning of
their employment of their pooling obligations and continue to remind them throughout their employment that
a specific portion of their gratuities don’t belong to them.
You should clearly define the job duties of all employees
so that positions with hybrid-service/managerial functions are excluded from the tip pool. Employees who
perform any managerial duties should be excluded from
tip-pool distributions.
The author can be reached at Sedgwick, Detert, Moran &
Arnold LLP in Los Angeles, [email protected]. ✤
alternative dispute resolution
Arbitration award must
clearly articulate financial
terms of recovery
by Leslie J. Mann
The California Court of Appeal recently held that for an
arbitration award to be valid, the arbitrator must articulate
the financial terms of any recovery in the award. The court,
however, refused to toss out the award because it did provide a
recognized remedy.
Save the arbitration award!
Kimberly Mossman was notified that her position
as administrative assistant to the Oakdale police chief
was being eliminated for budgetary reasons. Oakdale’s
merit system rules provided that when a reduction in
force was caused by lack of funds, seniority would be
observed. Although Mossman qualified for vacant fulltime and part-time administrative secretary positions in
other city departments, she was told that she couldn’t
bump into other departments, wasn’t considered for
those positions, and was terminated.
Mossman filed a grievance that the parties stipulated to submit to final binding arbitration before a neutral arbitrator. The question was whether Mossman’s
bumping rights had been denied and, if so, what the appropriate remedy was. The parties agreed that if the arbitrator awarded a remedy, the arbitrator would retain
jurisdiction over any disputes concerning the award’s
interpretation or implementation.
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