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Lu v. Hawaiian Gardens Casino

January 22, 2009; as modified February 11, 2009


APPEAL from a judgment of the Superior Court of Los Angeles County, David Minning, Judge. Affirmed in part; reversed in part. (Los Angeles County Super. Ct. No. BC286164).

The opinion of the court was delivered by: Aldrich, J.



In Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062 (Leighton) this District Court of Appeal held that tip pooling in restaurants is not prohibited by Labor Code section 351, a statute precluding employers from obtaining access to employees' tips and gratuities. Plaintiff, a former casino dealer on behalf of a class of dealers, challenges the legality of a casino's policy requiring dealers to contribute part of the gratuities they receive to a tip pool for employees who provide service to casino patrons. No California case addresses tip pooling in casinos. Distinguishing Leighton, plaintiff argues that unlike restaurants where tips are left on the tables, in casinos, gratuities are handed directly to dealers, with the result that such gratuities belong solely to the dealers. The trial court granted judgment on the pleadings ruling that Labor Code sections 351 and 450 do not provide for a private cause of action. The court then granted the casino's summary judgment motions and dismissed plaintiff's causes of action under Labor Code sections 221, 1197, 2802, and the unfair competition law (Bus. & Prof. Code, § 17200 (the UCL)) on the basis there being no factual dispute, as a matter of law, the casino's mandatory tip pooling policy did not violate these statutes.

We hold that nothing in Labor Code section 351 prohibits tip pooling in casinos. We further hold, although sections 351 and 450 contain no private right to sue, that they may nonetheless serve as predicates for suits under the UCL. A triable factual issue about whether some tip pool recipients are "agents" in contravention of section 351 precludes summary judgment of the UCL cause of action based on that statute only. In all other respects, summary judgment was properly granted. Accordingly, we affirm the judgment in part and reverse it in part.


Defendant Hawaiian Gardens Casino, Inc. (the Casino) operates approximately 108 tables where customers pay to play games of chance such as poker, Pai Gow, Blackjack, and others. Opened in 1997, the Casino employed about 650 dealers at the time of this lawsuit.

The following facts are undisputed: The Casino has a written tip pool policy that requires dealers to segregate 15 or 20 percent of the tips they receive at the close of each shift, depending on the location of the table and the game dealt. Dealers keep the remaining 80 to 85 percent of the tips they receive. The Casino's tip pool policy works on the honor system, under which it leaves to the dealers the task of calculating the amounts designated for the pool.

In accordance with the policy, the Casino deposits the tip pool money in a "tip pool bank account" for later distribution to designated employees who provide service to customers, such as the chip service people (also known as "chip runners"), poker tournament coordinators, poker rotation coordinators, hosts, customer service representatives or "floormen," and concierges. Payroll distributes the dealers' contribution to the pool participants. The tip pool policy specifically forbids employers, managers, or supervisors to receive money from the tip pool.

Every two weeks, dealers receive paychecks covering the minimum hourly wage, regardless of tips received from patrons. The Casino does not deduct from that sum the amount of tips that dealers receive. The Casino does not use the tips collected for the pool to offset or pay for the minimum-wage paychecks it issues to dealers. Nor does the Casino keep the tip pool money for its own use. The Casino does not charge dealers, or any other employee who receives tip pool proceeds, to offset the administrative costs of handling the tip pool. Dealers take home income that significantly exceeds the minimum wage.

Plaintiff, Louie Hung Kwei Lu, is the representative of a class of dealers*fn1 at the Casino. Lu's complaint against the Casino and its general manager, Ron Sarabi, alleged that the Casino's tip pool policy constituted a conversion of his wages, and violated employee protections contained in Labor Code section 221 (employers may not compel wage kickbacks); section 351 (employers may not take, collect or receive gratuities); section 450 (employers may not compel employees to patronize the employer); section 1197 (employers may not pay less than minimum wage); and section 2802 (employer indemnification for employee's necessary expenses). The complaint also alleged that the Casino's conduct in violating each of these cited Labor Code provisions constituted an unfair business practice under the UCL.

The Casino moved for judgment on the pleadings of the causes of action for violation of Labor Code sections 351 and 450. It argued that there is no private right to sue for violations of either Labor Code section. The trial court granted the motion.

Soon thereafter, the Casino brought successive motions for summary adjudication of the remaining causes of action. It argued that, pursuant to Leighton, supra, 219 Cal.App.3d 1062, tip pools are permissible in California. Therefore, the Casino observed that in opposing summary adjudication, Lu could not dispute that the Casino did not violate any of the Labor Code sections enumerated in the complaint and did not convert any property belonging to dealers. Similarly, the Casino argued, where the tip pool was permissible, its policy was not an unfair business practice in violation of the UCL.

In opposing these motions, Lu attempted to distinguish the Casino's tip pool arrangement from that of the restaurant in Leighton where tips are often left on the table by the departing customer. In casinos, he asserted, dealers sit with the patrons while providing services connected with the games. Tips are handed, slid, or tossed directly to the dealers while the dealers continue to provide services. Dealers are able to thank the patrons for the tips. Sometimes patrons tip dealers several times during the same one-half hour dealing period, usually after they win a hand. Moreover, periodically, patrons openly, directly, and independently tip other employees of the Casino. Lu also provided evidence that some employees who receive tip-pool money supervise or direct dealers.

The court granted the Casino's summary adjudication motions. After judgment was entered, Lu filed his timely appeal.


Lu contends that the trial court erred in granting the Casino's motions for judgment on the pleadings and summary adjudication because the Casino's mandatory tip pool arrangement is not permitted where it is factually and legally distinguishable from tip pooling in the restaurant industry under Leighton.


1. Lu does not have a private right to sue directly under Labor Code sections 351 and 450 but said statutes may serve as predicates to causes of action under the UCL for violation thereof.

The Casino argued in its motion for judgment on the pleadings that Lu's causes of action for violation of Labor Code sections 351*fn3 and 450*fn4 had to be dismissed because those statutes do not provide for private rights of action.

When reviewing an order granting judgment on the pleadings, "[w]e treat as admitted all material facts properly pleaded, give the complaint's factual allegations a liberal construction, and determine de novo whether the complaint states a cause of action under any legal theory. [Citation.] We may rely on any applicable legal theory in affirming or reversing because we ' "review the trial court's disposition of the matter, not its reasons for the disposition." ' [Citation.]" (Sanchez v. City of Modesto (2006) 145 Cal.App.4th 660, 671.)

No California court has yet determined whether Labor Code sections 351 and 450 contain a private right to sue.*fn5 The applicable rules for making this determination are set forth in Vikco Ins. Services, Inc. v. Ohio Indemnity Co. (1999) 70 Cal.App.4th 55: "Adoption of a regulatory statute does not automatically create a private right to sue for damages resulting from violations of the statute. Such a private right of action exists only if the language of the statute or its legislative history clearly indicates the Legislature intended to create such a right to sue for damages. If the Legislature intends to create a private cause of action, we ...

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