Opinion ID: 1312025
Heading Depth: 3
Heading Rank: 4

Heading: Discussion of the Claim Before the Court

Text: As stated above, the IWC and the Restaurant and Hotel Associations each make what is in substance a single claim: the Commission is generally not required to establish a single minimum wage for all employees and hence may set a lower, alternative minimum wage for some; moreover, section 351 does not bar the two-tier minimum wage system at issue here: as it is currently construed by the Commission, the provision does not prohibit a lower, alternative minimum wage for tipped employees; this construction is reasonable and hence should be given effect; it is true the Commission's former construction barred such an alternative minimum wage, but it is not true this court definitively adopted that construction in the Industrial Welfare Commission case. (5) We agree that the IWC is generally not required to fix a single minimum wage for all employees. In article XIV, section 1 of the California Constitution, the people have given the Legislature broad power in this area: The Legislature may provide for minimum wages and for the general welfare of employees and for those purposes may confer on a commission legislative, executive, and judicial powers. (Italic added.) In Labor Code sections 1173 and 1178 and following, the Legislature in turn has delegated its power in this regard to the Commission. In view of the foregoing, we would be reluctant to recognize a single-minimum-wage requirement limiting the Commission's authority unless the Constitution or the code at least implied such a requirement with reasonable clarity. They do no such thing. Hence, we conclude that the Commission is not subject to such a requirement. We cannot agree, however, that section 351 does not bar the two-tier minimum wage system at issue here. Our reasoning is as follows. We recognize that in Industrial Welfare Com. v. Superior Court, supra, 27 Cal.3d 690, we did not definitively adopt as our own the IWC's former construction of the statute barring a lower minimum wage for tipped employees, but simply concluded that such an interpretation was reasonable. ( Id. at pp. 729-730.) On this point the Court of Appeal was in error. (6) We also recognize that in the abstract, a current administrative interpretation would ordinarily be entitled to great weight. (See Industrial Welfare Com. v. Superior Court, supra, 27 Cal.3d at p. 724.) But when as here the construction in question is not a contemporaneous interpretation of the relevant statute and in fact flatly contradicts the position which the agency had enunciated at an earlier date, closer to the enactment of the ... statute[,] it cannot command significant deference. ( General Electric Co. v. Gilbert (1976) 429 U.S. 125, 142 [50 L.Ed.2d 343, 358, 97 S.Ct. 401].) (7) Having considered the matter closely and accorded the IWC the fullest deference justified by the facts and consistent with our obligation to declare the meaning of the law, we believe that section 351 must be construed to bar the two-tier minimum wage system at issue here and hence that the Commission's current interpretation of the provision is unreasonable. As we read the words and legislative history of section 351 in its current and previous forms, we discern the legislative intent underlying the provision as it now stands to be as follows. Broadly, the Legislature has declared that tips belong to the employee and the IWC may not permit an employer to obtain the benefit of such tips by paying a tipped employee a wage lower than he would be obligated to pay if the employee did not receive tips. More narrowly, it has declared that the IWC may not permit an employer to use a tip credit to pay a tipped employee a wage lower than the minimum wage he would be obligated to pay if the employee did not receive tips. Our reading of the legislative intent is grounded in the words of A.B. 78  the ultimate source of section 351 in its current form  and its legislative history. As stated by the Legislative Counsel: A.B. 78 ... would delete provisions of law that now, broadly speaking, enable employers to obtain the benefit (as, in effect, the payment of wages) of tips and other gratuities received by their employees, and thereby prohibit an employer from receiving such a benefit, and would invalidate the IWC's regulations authorizing the crediting of tips or gratuities against the minimum wage.... (Ops. Cal. Legis. Counsel on A.B. 78, supra, at pp. 1, 3.) Our reading receives further support from A.B. 10: AB 10 prohibits an employer from taking any tip given by a patron to his employee and prohibits an employer from requiring that such tip be credited against wages. (Assem. Com. on Labor Relations, Mem. on A.B. 10, supra, at p. 1.) Finally, our reading is confirmed by A.B. 232, the immediate source of section 351 in its current form: The bill was intended To eliminate the authority of the Industrial Welfare Commission to permit employers to credit tips against the wages of employees and thereby to require employers to pay employees at least the minimum wage regardless of the amount of tips the employees receive. (Sen. Com. on Ind. Relations, Mem. on A.B. 232, supra, at p. 1.) Scrutinized in light of the legislative intent underlying section 351 in its current form, the IWC's construction of the provision to permit the two-tier minimum wage system at issue here is unreasonable. As stated above, the Legislature has broadly declared that the Commission may not permit an employer to obtain the benefit of his employee's tips by paying the employee a wage lower than he would be obligated to pay if the employee did not receive tips. But in establishing the system under review, the Commission has attempted to do the very thing the Legislature has prohibited: under this system, the Commission clearly purports to allow an employer to pay a tipped employee a wage lower than he would be obligated to pay if the employee did not receive tips. As also stated above, the Legislature declared more narrowly that the IWC may not permit an employer to use a tip credit to pay a tipped employee a wage lower than the minimum wage he would be obligated to pay if the employee did not receive tips. Although in form they may be different, in function the tip credit and the alternative minimum wage are identical. The IWC itself candidly admits as much in its opening brief: To be sure, the alternative minimum wage, like a tip credit, does result in less total income for tipped employees. Considering the words and legislative history of section 351 in its current and previous forms, we believe that the Legislature impliedly declared that the Commission may not permit an employer to use an alternative minimum wage to pay a tipped employee a wage lower than the minimum wage he would be obligated to pay if the employee did not receive tips. We might have come to a different result if the words and legislative history of the provision revealed an intent on the part of the Legislature to prohibit only the tip credit and not its effect, i.e., lower income for tipped employees. The provision's words and history, however, reveal no such intent. Against our conclusion that section 351 in its current form bars the two-tier minimum wage system at issue here, the IWC and the Restaurant and Hotel Associations present two broad arguments. The first is that section 351 does not expressly bar the system under review: by its terms, the provision speaks only of employers and wages due tipped employees, and does not concern the Commission or the scope of its power to fix minimum wages. We agree. Our analysis, however, is not premised in any part whatever on the existence of an express statutory prohibition. The second argument is that section 351 does not impliedly bar the two-tier minimum wage system at issue here. It is claimed that the sole purpose of the provision is definitively declared in section 356 to be the prevent[ion of] fraud upon the public in connection with the practice of tipping and that that purpose is not frustrated by the system under review. The point is without merit. As the analysis presented above reveals, the prevention of fraud cannot be deemed the sole purpose of section 351 in its current form : the provision was broadly intended to bar the IWC from permitting an employer to pay a tipped employee a wage lower than he would be obligated to pay if the employee did not receive tips; and it was more narrowly intended to bar the Commission from permitting an employer to use a tip credit to pay a tipped employee a wage lower than the minimum wage he would be obligated to pay if the employee did not receive tips. We do not disregard the Legislature's declaration of purpose in section 356. But we cannot consider it definitive: the declaration was enacted in 1929 and was codified in 1937, when section 351 was simply a notice statute; it has remained unchanged since 1937, but in the meantime section 351 has been radically amended into a statute establishing substantive public policy without any notice requirement whatever. It is also claimed that neither the words nor the legislative history of the provision in its current or previous forms reveals any intent on the part of the Legislature to affect the scope of the Commission's power to fix minimum wages or specifically to bar it from establishing a lower, alternative minimum wage for tipped employees. But as the analysis presented above shows, this point too is without merit: the intent, albeit implied, is clear. Therefore, we conclude that the Court of Appeal  although misconstruing the effect of the Industrial Welfare Commission case  correctly decided that section 351 barred the two-tier minimum wage system at issue here. We also conclude that the court correctly ordered the relief sought, i.e., the establishment of a single minimum wage of $4.25 per hour for all employees without exception. [1] The judgment of the Court of Appeal is affirmed.