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Don’t Gamble On Tip-Pooling Arrangements

Posted in Labor Law, Wage & Hour

By:   Brendan J. Begley

On Wednesday, the California Court of Appeal affirmed a casino’s tip-pooling arrangement for its card-dealer employees in Avidor v. Sutter’s Place, Inc. That published decision (available at this link) brings to mind verses from Kenny Rogers’ old country song, The Gambler: “You got to know when to hold ’em, know when to fold ’em, know when to walk away and know when to run.” If the songwriter had known about the Avidor lawsuit, that refrain could have added, “You got to know when California law allows tip-pooling for employees, and know when it don’t.”

According to the Avidor decision, casino patrons “customarily tipped dealers when they won a hand . . . and dealers occasionally tipped other employees as well.” For example, a dealer “might tip a porter or waitress when he or she performed a service for him while he was dealing.” Likewise, customers might tip “floor people, chip runners, porters, waitresses, and anyone else whom they ‘felt like tipping,’ even cashiers.”

Dealers at that casino received between $750 and $1,500 in tips per week. Meanwhile, the employer’s policy required dealers “to contribute a set amount per hour [generally between $2.50 and $5.00] into a tip pool, which was distributed to nondealer employees.” Consequently, dealers typically contributed no more than 15 percent of the tips they received from customers to the tip pool.

Either before or after the dealers sued their employer to challenge this policy, both sides of the legal dispute may have heard Kenny Rogers’ words ringing in their ears: “You never count your money when you’re sittin’ at the table. There’ll be time enough for countin’ when the dealin’s done.”

In their lawsuit, the dealers asserted numerous legal theories – including a claim that the tip-pool arrangement violated section 351 of the California Labor Code. That statute declares that every gratuity is “the sole property of the employee or employees to whom it was paid, given, or left for.” As such, the statute bars employers and their “agents” from trying to “collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron.”

According to the dealers, the casino misappropriated their tips “in order to ‘fund part of the costs of employing other employees,’ those who were ‘not intended recipients of the tips.’” The trial did not allow the dealers to present evidence regarding whether patrons intended that the tip to be given to the dealers or shared with other employees. The appellate court agreed that the intent of the tippers is irrelevant.

The dealers also argued that, even if the policy were lawful, the employer violated the statute by requiring the tip pool to be shared with improper “agents,” such as the casino’s lead floor person, director of surveillance, housekeeping supervisor, services manager, and tournament director. However, California’s Sixth Appellate District found no evidence that those employees had the requisite level of supervisory authority to be counted as agents. As a result, the Court of Appeal affirmed the judgment in favor of the casino.

This decision follows a series of cases upholding tip-pooling arrangements in the Golden State. Nonetheless, an employer may find itself wishing that it had played a different hand if pooled tips are shared with improper agents. Thus, employers still are well advised to consult with legal counsel to assess the legality of such policies. As Kenny Rogers said, “Ev’ry gambler knows that the secret to survivin’ is knowin’ what to throw away and knowing what to keep.”