Court Opinion

ID: 9750132
Source: CourtListenerOpinion
Date Created: 2023-08-28 14:22:21.308927+00
Date Added: 2024-06-11T07:26:03.251689
License: Public Domain

CROSKEY, J., Concurring.
In the majority opinion, this court concludes that participants in mandatory tip pools need not provide direct table service; any employee who contributes to the service a patron receives may participate in a tip pool. I write additionally and separately to address the issues surrounding whether the law requires a mandatory tip pool to be fair and reasonable in order to avoid violation of Labor Code section 351.
Etheridge’s operative complaint alleges, “Defendants collect and require that ‘servers’ tip out of seven percent (7%) of their food sales to the kitchen”; “Defendants collect and require that ‘se[r]vers’ tip out of seven percent (7%) of their drink sales to the bartender”; and “Defendants collect and require that ‘servers’ tip out of five dollars ($5.00) for every one thousand dollars in sales to the dishwasher.” The “tip out of’ language is ambiguous; it is not clear if Etheridge is alleging that defendants required him to give (1) an amount equal to 7 percent of the amount of their food, and drink sales to the kitchen and bartender respectively; (2) an amount equal to 7 percent of their tips based on food and drink sales to the kitchen and bartender respectively; or (3) a different amount entirely. Etheridge argues that he has alleged that Reins requires him to tip the kitchen staff and bartender 7 percent of food and drink sales, and the dishwasher one-half of 1 percent of sales.1 While such a tip pool contribution appears so high as to be unlikely as a factual matter, case law indicates that it would not be unprecedented. (See, e.g., Elkins v. Showcase, Inc. (1985) 237 Kan. 720 [704 P.2d 977, 980-981] [concerning a mandatory tip pool contribution of 6 percent of sales, which amounted to approximately 72 percent of tips].) It would seem that, if Etheridge is, in fact, alleging that he was required to give the kitchen and bartender 7 percent of his sales, this amount could comprise nearly half of his tips, and would appear to be an amount well in excess of any common industry practice for tip pool contributions.
In Etheridge’s complaint, he alleged that any tip-pooling arrangement must be fair and reasonable. However, as he alleged that the tip pool in this case was unfair only because it shared tips with individuals who did not provide direct table service, this appeared to be a restatement of his argument under *926Leighton. Unsure as to whether Etheridge had also alleged that the tip pool was unfair and unreasonable on the basis that it gave an unreasonably large percentage of the tips to nonserver employees, this court sought additional briefing on the issues of (1) whether a cause of action could independently exist for an unfair and inequitable tip pool, aside from the issue of direct table service; and (2) whether Etheridge had alleged an unfair or inequitable tip pool, or could amend the complaint to do so. We indicated that he should identify specific facts which he had alleged, or truthfully could allege, in order to establish the tip pool is unfair or inequitable in its calculation and/or allocation of pooled tips. His response on this latter point was to reassert the allegations that the tip pool was unreasonable because it was not based on direct table service. He then stated simply, “If the Court decides that direct table service is not the standard to evaluate tip pool inclusion and the corresponding degree of participation, then [he] should be permitted to file an amended complaint alleging a violation under the chain of service standard. [He was] prepared to allege that the tip schedule was unreasonable because it is not tied to the employee’s or category of employees’ contribution to the service of the patron.” These two sentences do not comply with our request to identify “specific facts [which could truthfully be alleged that would] establish the tip pool is unfair or inequitable in its calculation and/or allocation of pooled tips.”
While Etheridge has not alleged a factual basis for a cause of action for an unfair or inequitable tip pool, it is my view that such a cause of action may be asserted in a proper case. That a tip pool, in order to be valid under Labor Code section 351, must be fair and equitable is, in my view, mandated by the rationale of Leighton. When that court concluded that the tips belong to all employees providing service to a patron, it stated that the tip was “to be equitably distributed between them.” (Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062, 1070 [268 Cal.Rptr. 647], italics added.) When that court stated that tip pooling advances the interests of the employees, it was because such a policy would “protect[] the personal property of the employees and ensures a fair distribution of the gratuity to those who earned it, making certain that each gets his fair share.” {Id. at p. 1071, italics added.) In rejecting the dissent’s argument that the majority expressed too little concern for servers’ rights, the Leighton court stated, “We are just as much concerned about wages and working conditions for and the property rights of [servers] in eating establishments as is the author of the dissent, but we are just as concerned with the other employees, i.e., [bussers] and bartenders, who, as well, render service to the same patron. Our ruling is intended to ensure that all such employees be placed in a fair and equitable position. It is because we are not insensitive to the plight of those employees that our ruling allows for a fair distribution of the gratuity to all those who earned it by contributing to the service afforded the patron, which sharing can only promote *927harmony among the employees, provide a peaceful environment in which to work and improve service to the public.” (Id. at p. 1072, fn. 6, italics added.)
Thus a mandatory tip pool should only be sustained under Labor Code, section 351 when it works a fair and equitable distribution among the employees who participate in the tip pool. If that distribution is unfair or inequitable, it is effectively no different from the case where the employer takes a portion of the tips received by one employee and gives them to another in order to lessen the employer’s own obligation to pay the second employee. As explained in the majority opinion, such conduct constitutes a violation of Labor Code section 351.2
1 recognize that such a cause of action would implicate serious policy concerns. The courts are ill equipped to determine whether, for example, bussers at a particular restaurant provide 5 percent or 10 percent of the service received by a patron, and are even less equipped to determine whether a specific busser earned his or her specific share. (Cf. Leighton, supra, 219 Cal.App.3d at p. 1071 [explaining that it is the employer, not the server, who is to determine whether fellow employees are properly doing their jobs].) Just as the business judgment rule insulates from court review management decisions made by corporate directors in good faith in what they believe is the organization’s best interests (see, e.g., Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1121 [86 Cal.Rptr.3d 145]), so should an employer’s good faith tip pool distribution policy be accorded a substantial level of deference. Nonetheless, in a proper case, where an employee is able to allege facts reflecting a tip pool that is so inequitable that it appears to bear no relation to the participants’ efforts in the chain of service, a remedy must be provided. (See, e.g., Cal. Dept. of Industrial Relations, Division of Labor Standards Enforcement, Opinion Letter No. 1998.12.28-1 (Dec. 28, 1998) p. 3 [stating that “[w]hile an employer must have the necessary discretion and latitude to implement a tip pooling distribution that is appropriate to circumstances that may be unique to a particular restaurant, a tip pooling distribution that is patently unfair or unreasonable would violate Labor Code §[]351.”].) To hold otherwise would leave an aggrieved employee subject to even arbitrary decisions by an employer and with no recourse other than to leave his or her employment.
*928In addition to the proposition that any mandatory tip-pooling policy should be subjected to a fair and equitable standard, I share another view expressed by my dissenting colleague, Presiding Justice Klein. I believe this is an appropriate case for review by the Supreme Court.

 Defendants, in its respondent’s brief, does not interpret the complaint in this manner.

 Division Two of the First Appellate District recently reached a different conclusion, stating simply that Labor Code section 351 “does not address . . . equitable considerations.” (Grodensky v. Artichoke Joe’s Casino (2009) 171 Cal.App.4th 1399, 1449 [91 Cal.Rptr3d 732].) In my view, however, the Grodensky opinion failed to recognize that the rationale of the decision in Leighton was that mandatory tip pools do not violate Labor Code section 351 only when those tip pools are fair and equitable. If the tip pool distribution is unfair and inequitable, the tip is no longer the property of the “employees to whom it was paid, given, or left for,” and thus would thereby violate Labor Code section 351, for the reasons explained in the majority opinion.