Opinion ID: 1312025
Heading Depth: 3
Heading Rank: 2

Heading: The Words and Legislative History of Section 351 in Its Current and Previous Forms

Text: In 1917 the Legislature enacted the statute that is evidently the ultimate source of section 351. The provision declared in relevant part: Any employer or agent or representative of an employer ... who shall demand or receive directly or indirectly from any person then in the employment of said employer, any fee, gift or other remuneration or consideration, or any part or portion of any tips or gratuities received by such employee while in the employment of said employer, in consideration or as a condition of such employment or hiring or employing any person to perform such services for such employer or of permitting said person to continue in such employment, is guilty of a misdemeanor.... (Stats. 1917, ch. 172, § 1, p. 257.) In In re Farb (1918) 178 Cal. 592 [174 P. 320, 3 A.L.R. 301], this court struck down the 1917 statute as violative of principles of substantive due process, specifically freedom of contract. In the course of its opinion, the court rejected an argument that the provision was designed as a measure to protect the public from fraud regarding the ultimate disposition of tips and was therefore constitutional: If we concede the correctness of th[e] contention [that the provision was intended to prevent fraud], for the purposes of discussion, still we must declare the statute void as seeking to overcome by prohibition of any contract between employer and employee, a deception which would instantly disappear if the former were required to post in his place of business a notice of the terms of the contract whereby he was to have the benefit of gratuities.... The law does not tolerate the prohibition of something which may be regulated in such way as to overcome any evils which may be incidentally connected with it. ( Id. at p. 598.) In 1929 the Legislature enacted a statute (hereinafter the 1929 statute) in evident response to In re Farb. The relevant provisions were as follows. SEC. 2. Every employer, or agent of any employer, who collects, takes or receives any tips or gratuities, or a part thereof, paid or given to or left for his employees by patrons, or who deducts any amount from wages due his employees on account of such tips or gratuities, or who requires his employees to credit the amount, or any part thereof, of such tips or gratuities received by them against and as a part of the wages due such employees from said employer, shall post and keep posted in a conspicuous place ... a notice or notices [explaining the disposition of tips].... .... .... .... .... .... Such notice shall also state the extent to which the employees are required by such employer to accept such tips or gratuities in lieu of wages or the extent to which the employee is required to accept and credit such tips and gratuities against wages due such employees. .... .... .... .... .... SEC. 5.... The Legislature ... expressly declares that the purpose of this act is to prevent fraud upon the public in connection with the practice of tipping and declares this a law passed for a public reason which can not be contravened by a private agreement and as a part of the social public policy of this state, binding upon all departments of the state government. (Stats. 1929, ch. 891, §§ 2, 5, pp. 1972-1973.) In 1937 the Legislature codified the relevant provisions of the 1929 statute in modified form as sections 351, 352, and 356 of the Labor Code. In its original form section 351 declared in relevant part as follows. Every employer or agent who collects, takes, or receives any gratuity, or a part thereof, paid, given to, or left for an employee by a patron, or who deducts any amount from wages due an employee on account of such gratuity, or who requires an employee to credit the amount, or any part thereof, of such gratuity against and as a part of the wages due the employee from the employer, shall keep posted in a conspicuous place ... a notice [explaining the disposition of tips].... (Stats. 1937, ch. 90, § 351, p. 203.) In its original form section 352 declared: The notice shall also state the extent to which the employees are required by the employer to accept gratuities in lieu of wages or the extent to which the employee is required to accept and credit gratuities against wages. (Stats. 1937, ch. 90, § 352, p. 203.) Finally, section 356 stated  and continues to state: The Legislature expressly declares that the purpose of this article [viz., article I (Gratuities) of chapter 3 (Privileges and Prerequisites) of the Labor Code, i.e., sections 350 to 356] is to prevent fraud upon the public in connection with the practice of tipping and declares that this article is passed for a public reason and can not be contravened by a private agreement. As a part of the social public policy of this State, this article is binding upon all departments of the State. (Stats. 1937, ch. 90, § 356, p. 203.) In 1965 the Legislature amended sections 351 and 352. As amended, section 351 stated as follows: No employer or agent shall collect, take, or receive any gratuity, or a part thereof, paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of such gratuity, or require an employee to credit the amount, or any part thereof, of such gratuity against and as a part of the wages due the employee from the employer, unless he posts in a conspicuous place ... a notice [explaining the disposition of tips].... (Stats. 1965, ch. 686, § 1, pp. 2062-2063.) As amended, section 352 declared: The notice required by Section 351 shall also state the extent to which the employees are required by the employer to accept gratuities in lieu of wages or the extent to which the employee is required to accept and credit gratuities against wages. (Stats. 1965, ch. 686, § 2, p. 2063.) In 1968 the IWC adopted Wage Order No. 5-68, which established a so-called tip credit system: Amounts may be credited as part of the minimum wage for gratuities received by any [covered employee] engaged in an occupation in which the employee customarily and regularly receives more than twenty dollars ($20) per month in gratuities. The credited amount shall in no case exceed twenty cents (20¢) per hour. This provision was codified at subdivision 4(c) of section 11380 of title 8 of the California Administrative Code (now Cal. Code Regs.). In 1972 Assemblyman Leroy F. Greene introduced Assembly Bill No. 78, 1972 Regular Session (hereinafter A.B. 78) (1 Assem. J. (1972 Reg. Sess.) p. 120) in an attempt to amend section 351. The bill  which was virtually identical in relevant part to the provision as it now stands  would have deleted the notice exception and would have added the following provision: Every ... gratuity is hereby declared to be the sole property of the employee to whom it was paid, given, or left for [ sic ]. The opinion of the Legislative Counsel on the effect of A.B. 78 was in relevant part as follows. A.B. 78, as introduced, 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. (Ops. Cal. Legis. Counsel on Assem. Bill No. 78 (1972 Reg. Sess.) (Feb. 29, 1972) p. 1 [hereinafter Ops. Cal. Legis. Counsel on A.B. 78].) It also stated: Pursuant to its authority the Industrial Welfare Commission has promulgated subdivision 4(c) of Section 11380 of Title 8 of the California Administrative Code. Subdivision 4(c) of Section 11380 provides [for a `tip credit' system.] ... [¶] This subdivision, in authorizing the crediting of tips or gratuities against the minimum wage of [covered employees] would be in conflict with the provisions of A.B. 78, as introduced, if A.B. 78, as introduced, should be enacted, since the bill in that form would prohibit any such crediting. Consequently, in view of the preceding, we think that if the bill in that form is enacted into law, subdivision 4(c) of Section 11380 of Title 8 of the Administrative Code would be invalid. ( Id. at pp. 2-3.) As 1972 was drawing to a close, however, the attempt to amend section 351 proved unsuccessful: A.B. 78 died in the Senate Committee on Industrial Relations. (Assem. Final Hist. (1972 Reg. Sess.) p. 83.) In 1973 Assemblyman Greene introduced Assembly Bill No. 10, 1973-1974 Regular Session (hereinafter A.B. 10) (1 Assem. J. (1973-1974 Reg. Sess.) p. 17)  which was identical in relevant part to A.B. 78 as introduced  in another attempt to amend section 351. In a memorandum by the Assembly Committee on Labor Relations it is stated: 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. This eliminates the present practice whereby employers can credit tips up to 20 cents per hour of the minimum wage. (Assem. Com. on Labor Relations, Mem. on Assem. Bill No. 10 (1973-1974 Reg. Sess.) for Apr. 4, 1973, Hg., p. 1 [hereinafter Assem. Com. on Labor Relations, Mem. on A.B. 10].) It further states: Present law also requires that a notice be posted when tips are being credited against wages. AB 10 eliminates that requirement. ( Ibid. ) This attempt to amend section 351 proved to be partially successful: the Legislature retained the provision declaring tips to be the employee's property, but added a provision to preserve the validity of the tip credit system established by Wage Order No. 5-68. As amended, section 351 stated in relevant part as follows. No employer or agent shall collect, take, or receive any gratuity or a part thereof, paid, given to or left for an employee by a patron, or deduct any amount from wages due an employee on account of such gratuity, or require an employee to credit the amount, or any part thereof, of such gratuity against and as a part of the wages due the employee from the employer, except to the extent that may be permitted by a valid regulation of the California Division of Industrial Welfare, and further provided he posts in a conspicuous place ... a notice ... stating the extent to which the employees are required by the employer to accept gratuities in lieu of wages or the extent to which the employee is required to accept and credit gratuities against wages. Every such gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for [ sic ]. Stats. 1973, ch. 879, § 1, pp. 1610-1611, italics added.) As it amended section 351 into a form that included the substance of section 352, the Legislature repealed section 352 as a separate provision. (Stats. 1973, ch. 879, § 2, p. 1611.) In 1974 the Legislature amended section 351 by substituting the words Industrial Welfare Commission for the words California Division of Industrial Welfare. (Stats. 1974, ch. 552, § 1, p. 1375.) Late in that same year Assemblyman Greene introduced Assembly Bill No. 232, 1975-1976 Regular Session (hereinafter A.B. 232) (1 Assem. J. (1975-1976 Reg. Sess.) p. 138), in a final attempt to amend section 351 to reflect the policy he previously urged. The Legislative Counsel's Digest of A.B. 232 declares: The existing law prohibits an employer from receiving or deducting from employee wages any part of a gratuity given to or left for an employee by a patron, except to the extent permitted by regulations of the Industrial Welfare Commission, provided that a notice is conspicuously placed in the place of business stating the extent to which the employee is required to credit gratuities against wages. [¶] This bill would eliminate the authority of the Industrial Welfare Commission to permit an employer to receive or deduct from employee wages any part of a gratuity given to or left for an employee by a patron. (Legis. Counsel's Dig., Assem. Bill No. 232 (1975-1976 Reg. Sess.), as introduced.) In a memorandum by the Senate Committee on Industrial Relations it is stated that the purpose of A.B. 232 is To eliminate the authority of the Industrial Welfare Commission to permit employers to credit tips against the wages of employees. (Sen. Com. on Ind. Relations, Mem. on Assem. Bill No. 232 (1975-1976 Reg. Sess.) (May 19, 1975) p. 1 [hereinafter Sen. Com. on Ind. Relations, Mem. on A.B. 232].) In the memorandum it is also stated that the bill would eliminate the authority of the Industrial Welfare Commission to permit tips to be credited against the wages of employees. The effect of this bill would be to require employers to pay employees at least the minimum wage regardless of the amount of tips the employees receive. ( Ibid. ) Similarly, in a memorandum by the Assembly Committee on Labor Relations it is stated that A.B. 232 would repeal the authority of the Industrial Welfare Commission to permit an employer to deduct tips from wages, and thus, would prohibit the consideration of tips as wages. The basis for this legislation would appear to be that tips or gratuities are given for individual excellence of service above and beyond the basic duties of the employment, and as such, the employer has no vested right to consider tips a part of wages. (Assem. Com. on Labor Relations, Mem. on Assem. Bill No. 232 (1975-1976 Reg. Sess.) p. 1.) This time, the attempt to amend section 351 proved totally successful: in 1975 the Legislature amended this provision into its current form by deleting the exception introduced at the end of the first sentence in 1974, thereby revoking the authority of the IWC to allow an employer to obtain the benefit of tips received by his employees. Thus, as it now stands section 351 provides in relevant part as follows. No employer or agent shall collect, take or receive any gratuity or a part thereof, paid, given to or left for an employee by a patron, or deduct any amount from wages due an employee on account of such gratuity, or require an employee to credit the amount, or any part thereof, of such gratuity against and as a part of the wages due the employee from the employer. Every such gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for [ sic ].