California Courts Continue to Whittle-Down Employee Rights to Tips
On June 2, 2009, the California Fourth District Court of Appeal overturned an $86 million dollar judgment against Starbucks for alleged tip-pooling violations. The Court’s decision, styled Chau v. Starbucks, 174 Cal. App. 4th 688 (2009), concluded that Starbucks baristas failed to prove that Starbucks’ “tip pooling” practices violated California law. Under California law, management is generally prevented from sharing in the tip proceeds of employees. (Labor Code § 351). The Court reasoned that this did not occur in this case because shift supervisors, a job position below assistant manager, performed the same work as baristas and were an intended recipient of customer tips that were deposited into a common tip box. Significantly, the Court acknowledged that the outcome may have been different had Starbucks permitted store managers and assistant managers to take a share in the tips.
The Court’s ruling in Chau, which is the third appellate decision this year to have applied a limited construction of California’s tip statute, provides no clear solutions for the approximately 120,000 California Starbucks baristas who rely on gratuities as a substantial portion of their income. Presently, the fate of the tip statute itself hangs in the balance, as the California Supreme Court has taken up the issue of whether Labor Code section 351 even provides employees a private right of action against their employers for improperly withholding tip proceeds. See Lu v. Hawaiian Gardens Casino, Inc., 170 Cal. App. 4th 466 (2nd Dist. 2009), review granted on April 29, 2009 (Supreme Court Case No. S171442); Grodensky v. Artichoke Joe's Casino, 171 Cal. App. 4th 1399 (1st Dist. 2009), review granted on June 24, 2009 (Supreme Court Case No. S172237). Depending on how the Supreme Court rules on this question in the negative, California employees could be dependent on the Division of Labor Standards Enforcement (the state agency charged with enforcing section 351) for vindication of their rights, absent amendment of the statute by the Legislature.
