…the legal principles prohibiting an employer from requiring an employee to share his or her personal top with the employer’s agent (“mandatory tip pooling”) do not logically apply to an employer policy requiring equitable apportionment of the proceeds in a collective tip box (“tip apportionment”)

So—shift supervisors can share in tip proceeds like the advance sheets say? Not so fast.

This is what you might call a highly fact intensive situation. It’s hard to say, of course, what was outcome determinative in this case, but here are three important things to consider before rewriting your employee handbooks:

(1) Starbucks has a relatively complex formula and procedure for allocating tips and placing the tip container.

(2) Starbucks shift supervisors were in the record as performing the same tasks as the Baristas about 90% of the time and only having “reporting” authority to the managers.

Those two were in the opinion. Then there’s this:

(3) Starbucks may not have invented the tip jar, but they may it ubiquitous. It’s been in the news, it’s been on TV, and we all know that it’s not quite the same thing as a personal tip. In other words, we have socially understood expectations and rules about the Starbucks tip jars that we may not in other situations. I know the case law was said to be irrelevant, but much section 351 case law discusses “intent.”

So, unless you have these things all going for you, I think it might be inviting disaster to just label this a “liberalization” of tip pooling rules. We may or may not get a more definitive rule from the California Supreme Court, but an amendment to the law from the Legislature telling us exactly how this is supposed to work in the modern workplace would be best.

P.S. Instead of citing evidence on the record, or taking judicial notice of some kind of market data, the Court cites another court case for the seemingly factual proposition that “‘tipping the providers of personal service’ is a ‘well-accepted part’ of our daily lives.” Does anyone else have a problem with this?

I don’t have as much of a problem with that as just saying it, though in this particular case, it doesn’t seem to be something objectionable, but I don’t want to create that slippery slope. Why is case law citable for facts?

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The Supreme Court also granted review in Pineda, a case relating to the statute of limitations on waiting time penalties (where the wages are paid). Is it 1, 3… or 4? I say 4 has to be considered a possibility, because some things we’ve thought were penalties were called premiums in the past.

Just sayin’.

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I’m hoping that the California Supreme Court will articulate a clear rule on tip pooling. I’m not asking for a pro-employer (or pro-employee) decision. I’m asking for a clear one. I’m aware of the justice theory arguments that oversimplified rules can be oppressive, but I think this is a sufficiently narrow area to begin with that the problem is absent—we’re not talking about failing to distinguish between manslaughter and murder just to have one and only one rule of homicide.

Lu (link to WageLaw) was the first in a series of three 2009 cases on tip pooling. It stands for the rule (or did, since it’s not uncitable) that Labor Code sections 351 and 450 contain no private right of action outside the UCL. Then there was Budrow v. Dave & Buster’s of California, Inc., which put the kibosh on the DLSE’s opinion letter an older 2AD case.  And most recently, Etheridge v. Reins Int’l Calif., Inc. (link to Shaw Valenza’s great summary) which set out the “chain of service rule.”

Now, here’s the rub. The Order granting review only sets forth one issue: whether the private right of action under those statutes exists. I’m inclined to agree with WageLaw that if the tips are wages, there’s a non-UCL action for them, and just because they’re tips doesn’t change that. I agree as far as that goes. But if they aren’t yet wages, if they’re just potentially wages pursuant to an agreed upon mechanism, then we have a different question.

It’s possible that the Supreme Court can use this discussion to set out a rule about when they become wages/property, and, therefore a rule about how they become so, we might be somewhere.

I’m very unsatisfied by some of the decisions trying to say what people “intend” when they give tips. Was there survey evidence on the record on appeal? Expert psychologist testimony? Restaurant consultant testimony? Casino consultant testimony?

Personally, I’m the kind of person that tips 20% at restaurants unless something goes horribly wrong. I do that both because I like to think I’m a person that respects work harder than what I do, and because the math of 20% is easier to do in your head than 15% which may contradict the former rationale. I suppose I do that because of my encounter with the waiter. Anyway, I’m not sure what I intend is really relevant. Is it wrong for others who work to get a share? Is it even wrong for the management to get a share?

I don’t think so, not on its face, at least not enough to lay down a blanket rule against it when the statute it silent. Does a different rule lend itself to abuses? Yes. But will the old DLSE rule eliminate them? No.

That’s my longwinded $0.02. The short of it is, just give us a simple rule. The beauty of simple rules is the people who don’t want to abuse will follow it, and the people who need to face enforcement won’t.

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SV have good bloggers who know how to do law blogging, so I won’t repeat their work on Etheridge v. Reins Int’l Calif., Inc. What’s interesting is that this case sets out yet another standard for tip pooling. Now instead of “direct table service” we have “chain of service.” Interestingly, this sort of reminds me of a case about solid waste, which says something was waste when the former owner intended to discard it. The Court of Appeal in all of these cases does a lot of philosophizing about what diners must intend when they leave tips. Was there any evidence on the record? any surveys? Doesn’t sound like it.

Not that it matters de jure under California stare decisis rules, but these cases all come from the Second District. De facto, of course, most trial judges follow the Court where their cases go even though they aren’t bound to do so. So, here, it’s a tough call. Which panel will you draw? (afaik, only Division Six has a discrete geographical origin.)

Between this case, the Dave & Busters case, and the Leighton case, which this case actually seems to un-overrrule a little bit in comparison with the Dave & Busters case, I can’t tell you what the law is. I’m not sure I can even tell you what the safe thing to do is. (Are you give over someone’s property if you just leave it with the servers??)

Time for the Supreme Court to speak on this.

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Until this is approved by the Supreme Court, I’d guess that we will see a split of authority eventually, but until this, California rules of stare decisis control in all of the state’s trial courts, and so is safe for now.

I think this rule makes more sense personally, though I wasn’t convinced by the Court’s argument that you can’t say who provides direct table service or that the Legislatures refusing to add that language in its revisions of section 351 means they didn’t intend it. Perhaps they didn’t add it because they were happy with the law as interpreted by its enacting agency…

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Knapp writes that “[i]n recent years, defense lawyers have enjoyed a pro-business trend in California court decisions.  The Court of Appeal’s decision in Brinker Restaurant Corp., et al. v. Superior Court of San Diego, 2008 DJDAR 11267, which many of us have been watching closely, is no exception”

Knapp is correct. We lawyers have been enjoying a pro-business trend in California court decisions. This is because the more the law changes, the more litigation there is, and, so we lawyers enjoy it. That is not to say that employers themselves have enjoyed it. Sure, a poll of employers would probably find strong support for the Court of Appeal’s holding, but a poll asking whether they would prefer tougher easy to follow consistent rules over more lenient more complex rules would, I am sure, go the other way. We lawyers benefit as long as there is change and rue the day that we won’t be needed as much.

Of course the policy argument behind this controversy is exactly as Knapp states it:

The Court of Appeal’s holding focuses too narrowly (and too inflexibly) on a pointy-headed dictionary definition, ignoring the practical context in which these rights are exercised, or not. In a busy, time-constrained work environment, there are many natural disincentives to take breaks. Managers and supervisors, even while recognizing break rights, often look askance at them and the employees who dutifully take them.

Employees who work through their breaks, or take shorter breaks, may get more praise and credit than those who don’t. The dynamic is intensified in an uncertain economy and for many immigrant groups who can be exceedingly obedient and timid.

There is no denying that the last decades have seen a aggregation of consumer and shareholder power that has caused the real cost of the production of goods to drop by, among other things, forcing worker productivity up. At the same time, the primary medium for aggregating worker power, unions, has declined precipitously. Therefore, at least from a macro view, there is no denying that businesses face powerful incentives to keep workers from taking breaks. Those incentives have their source, ironically, in many of the same people that are the workers who shop at places like Wal-Mart or hold shares in a pension fund.

In the courts, worker power can be aggregated, of course, by class actions. As Knapp points out, the Brinker case effectively works to eliminate the financial incentives of plaintiff’s attorneys to litigate these cases. Of course all of this is a question of policy. The pure legal reading of the statute probably lies in the “pointy-headed dictionary definition,” as Knapp puts it. So, if the standard interpretive tools used on the Labor Code are applied, what should the rule be?

Certainly there are instances where reducing break’s to “make available” from “insured” will make this statutory right de facto non existent, contrary to the “liberal interpretation” rules. But there are other cases where the aggregation of power works in reverse. Can a business with a small number of employees withstand a wage/hour lawsuit with all of its non-exempt employees as a class? Some can’t survive even a single Plaintiff’s case. There are situations also where the abuse of this rule are not likely to exist or where the employees actually prefer them.

It seems to be these different circumstances are what the Wage Orders, when they had a funded panel to write them, were meant to address. I would conclude that there is no right answer on this, because either way it’s going to wrongfully impact somebody. Ideally, the Supreme Court will find a way to craft a rule that allows for the higher scrutiny of “ensure” in cases where there is evidence of a systematic attempt to eliminate the statutory right, but will allow for leniency in cases where that is not the case, and workers simply choose to flex their time.

It’s equally wrong to put all employers in the same category. In some instances, there is a strength mismatch without class aggregation, but in the cases where there is not, I believe it is bad policy to ignore that.

Unfortunately, this doesn’t work out to a simple clear bright line rule which is what I argued for above. But clarity has to give way to a just result. Striking that balance is the trick.

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Funny titles aside, I was surprised WageLaw wasn’t more critical of this case, especially when I was (“Storm is his usual cautious self” they say.) Dogs and cats living together. Mass hysteria! But I think this says what I’m saying:

It is left to our imagination what kind of evidentiary showing would be necessary to establish that the statutory remedy under the Labor Code would be inadequate. We suspect that this holding would not have compelled a different result under so-called “slavery” cases, such as Bureerong v. Uvawas (1996) 922 F.Supp. 1450, where the District Court permitted punitive damages to be asserted in a wage claim brought by garment workers who were denied minimum wage and overtime.

In other words, even though they’re wages, they’re not wages. Or at least not was wagey as minimum wages. So, either we now have classes of wages, or a Court of Appeal has implicitly reversed the Supreme Court.

Again, I want to emphasize that it’s not my perosnal opinon that the statutory penalties and remedies provided in this case aren’t “adequate” or that I really think that meal period premiums aren’t penalties. 

For those of you strongly opposed to the holding in Murphy I would ask whether you think Courts of Appeal chipping away at decision is more effective than merely expedient. 

Petition for Review watch begins…

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Shaw Valenza has the best summary I’ve read.

This decision has a deeply flawed. My personal opinion is that I agree with the outcome in many regards, but that’s just my opinion—it’s not my legal analysis.

First, you can’t cite Kenneth Cole at the same time you are claiming what that opinion says aren’t penalties provide for penalties. That fails the guffaw test. That was a divisive case, but “wages not penalties” was the Supreme Court’s holding, not dicta, 7-0.

Second, the Labor Code defines wages as vested property of the worker, so the idea that this boils down to a pure contract analysis is wrong on its face (and then the equally weird citation to Foley in asserting that employment is not in any regards tortish). There are just too many ways in which the recovery of wages, in the Labor Code, the Bankruptcy Code, etc. is different than a contract action. You do not have to pay conceded contractually due amounts unconditionally, nor does a plain contractual debt create anything but an unsecured debt in bankruptcy.

None of this would be a problem but for the Kenneth Cole case, of course. The other penalties discussed in the case flow into this reasoning quite well. Paystub violations, sure.

Maybe someone can convince me that this case isn’t just ignoring Kenneth Cole.

I imagine that if my normally tepid response is this strong, the Petitions for Review and the Depublication Requests will fly.

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This would seem to suggest that there is a majority of judges agreeing with the Brinker analysis, but we saw that in Murphy only to have the Supreme Court unanimously overturn them.

My personal view was that the arguments for “penalty” in Murphy were mostly political, and that given that they could bear either interpretation, the law generally is supposed to liberally favor employees. Obviously, we can discuss that at length another time. My point is, I don’t think the arguments are as brazenly political in this situation. It really is just interpreting what you have to do to provide a meal period.

If providing means enforcing, it means enforcing. But if it means provide and the rest is up to the employee, then this recent line of cases is right. Do I believe that a change to the new rule will make “wink-wink nod-nod” situations more likely? I’m not sure I do. I think those are already rampant. Those situations still are arguably not providing, so enforcement is still available.

Frankly, I think it’s silly that employers were subject to liability for providing meal periods but not kicking people out at gunpoint. There’s plenty of people who aren’t providing jack to deal with.

I’ll be interested to see where this goes.

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This. Helps. No. One.

Unacceptable.

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I long for the day when at least the Appellate courts put their filings on-line.  If I chance upon a copy, I’ll post it.

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The docket is here.  I’m not sure if the Supreme Court will assign a new case number of not, but the old docket for the original Supreme Court case is here.

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