APPEALS from judgments of the Superior Court of Los Angeles County, William F. Highberger, Judge. Reversed. (Los Angeles County Super. Ct. Nos. BC377059, BC377060, BC377062, BC377063 & BC377065)
The opinion of the court was delivered by: Aldrich, J.
CERTIFIED FOR PUBLICATION
In this appeal, we address the validity of the Hotel Service Charge Reform Ordinance (Ordinance) enacted by the City of Los Angeles (the City), requiring non-unionized hotels in the Century Corridor near Los Angeles International Airport (LAX) to pass along mandatory service charges to workers who render the services for which the charges have been collected. The Ordinance is based upon the City's determination that LAX-area hotels reap economic benefits from their location and have the responsibility and ability to pay these workers a decent compensation. Service workers have seen their income decline as a result of the hotels' practice of imposing mandatory service charges because patrons assume these charges are paid to the workers and therefore do not leave them a gratuity.
Appellants are service workers who challenge the trial court's dismissal of their lawsuits to enforce the Ordinance on the grounds that it is preempted by Labor Code sections 350 through 356, which govern the disposition of gratuities. Appellants contend the Ordinance does not conflict with the Labor Code because it neither contradicts the Labor Code nor enters the field of regulating gratuities. Although not addressed by the trial court, appellants also contend the Ordinance does not violate the equal protection clauses of the federal and state Constitutions, is not void for vagueness under the due process clause, and is not an unconstitutional taking.
We conclude the Labor Code does not preempt the Ordinance because the Labor Code provisions regulating gratuities are not irreconcilable with the Ordinance, and the Legislature has not demonstrated its intent to regulate in the field of service charges. We further conclude there is no equal protection violation under the deferential, rational basis standard, and the Ordinance is not otherwise constitutionally infirm. Therefore, we reverse the judgments of dismissal entered following the trial court's order sustaining the demurrers to the complaints without leave to amend.
In 2006, the City enacted the Ordinance to increase the compensation of workers performing services at airport hotels. The Ordinance requires hotels with 50 or more rooms within the Gateway to Los Angeles Property Business Improvement District (Century Corridor PBID) adjacent to LAX (hereafter Corridor), to pass along service charges to those hotel workers who render the services for which the charges are collected. (L.A. Ord. No. 178084, adding Art. 4, Ch. XVIII, § 184.00 et seq. to Los Angeles Municipal Code (LAMC).)
Plaintiffs and appellants are banquet captains and servers at Corridor hotels.*fn1 They filed separate class action complaints against certain hotels*fn2 for violations of the Ordinance and the unfair competition law (Bus. & Prof. Code, § 17200 et seq.) (UCL). The complaints are similar and allege hotels own, control, or operate a hotel located within the Corridor.*fn3 Hotels allegedly failed to compensate plaintiffs and members of the putative class in the amount of the entire service charge as defined in the Ordinance.
Several hotels joined in a demurrer to the complaint,*fn4 contending the Ordinance: (1) is preempted by Labor Code sections 350 to 356,*fn5 which regulate gratuities; and (2) is unconstitutional in that it violates the equal protection clauses of the state and federal Constitutions, is void for vagueness, and amounts to a taking without just compensation.
The trial court agreed that the gratuity provisions preempted the Ordinance and did not reach the constitutional issues. The trial court concluded the Ordinance contradicted the Labor Code. It reasoned the gratuity statutes in the Labor Code set a "boundary between moneys which . . . belong to the employees, individually or jointly," and have "served as a bright-line distinguishing the validity of competing claims (from business owner and worker) to moneys provided by the customer." Based upon section 351, governing the disposition of gratuities (to the employee), the definition of "gratuity" in section 350, subdivision (e), and prior versions of the gratuity statutes, the trial court concluded the "employee does not have any claim to ownership in payments made by patrons which fall outside the definition of 'gratuity.' The vice of the Service Charge Ordinance is that it tries to do exactly this. It attempts to give the employees an ownership interest in mandatory charges added by the hotel . . . ." On that basis, the trial court sustained the demurrers without leave to amend and entered judgments of dismissal. Plaintiffs timely appealed, and we consolidated the appeals.
We consider two separate legal issues related to the validity of the Ordinance.
On the preemption question, we must determine whether the Labor Code provisions regulating gratuities and the Ordinance are in conflict because the Ordinance either contradicts state law or enters a field the Legislature intended to cover under the Labor Code.
Since we conclude the Ordinance is not preempted, we also must determine whether the Ordinance passes constitutional muster. On that issue, we perceive no constitutional infirmity.
I. The Labor Code Does Not Preempt The Ordinance
Whether the Ordinance is preempted is a question of law. (Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles (2006) 136 Cal.App.4th 119, 129.) Our preemption analysis requires us to interpret sections 350 to 356 of the Labor Code, which also is a question of law for our de novo review. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432; Bravo Vending v. City of Rancho Mirage (1993) 16 Cal.App.4th 383, 391-392.)
Hotels have the burden of demonstrating that the Labor Code provisions governing gratuities preempt the Ordinance. (Big Creek Lumber Co. v. County of Santa Cruz (2006) 38 Cal.4th 1139, 1149.) Courts are particularly "reluctant to infer legislative intent to preempt . . . when there is a significant local interest to be served that may differ from one locality to another. [Citations.]" (Fisher v. City of Berkeley (1984) 37 Cal.3d 644, 707.) If there is a significant local interest, the presumption favors the validity of the local ordinance against an attack of state preemption. Thus, when the City regulates in an area over which it traditionally exercises control, we will presume, absent a clear indication of preemptive intent from the Legislature, that the Ordinance is not preempted by state law. (IT Corp. v. Solano County Bd. of Supervisors (1991) 1 Cal.4th 81, 93-94.)
The traditional areas in which a city exercises control are set forth in the California Constitution: "A county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws." (Cal. Const., art. XI, § 7.) Local legislation that conflicts with general law is preempted and void. (O'Connell v. City of Stockton (2007) 41 Cal.4th 1061, 1067.) " ' "A conflict exists if the local legislation ' "duplicates, contradicts, or enters an area fully occupied by general law, either expressly or by legislative implication." ' " [Citations.]' " (Id. at p. 1067 citing Sherwin-Williams Co. v. City of Los Angeles (1993) 4 Cal.4th 893, 897; see also American Financial Services Assn. v. City of Oakland (2005) 34 Cal.4th 1239, 1251.) We are concerned with whether the Ordinance contradicts or enters a field fully occupied by the Labor Code.
"[L]ocal legislation is 'contradictory' to general law when it is inimical thereto. [Citation.]" (Sherwin-Williams Co. v. City of Los Angeles, supra, 4 Cal.4th at p. 898.) When a local ordinance "does not prohibit what the statute commands or command what [the statute] prohibits," the ordinance is not "inimical to" state law. (Id. at p. 902.) Local legislation that is inimical to state law is preempted.
Local legislation enters an area fully occupied by general law when "the Legislature has expressly manifested its intent to fully occupy the area or when it has impliedly done so in light of recognized indicia of intent." (Big Creek Lumber Co. v. County of Santa Cruz, supra, 38 Cal.4th at p. 1150 citing Great Western Shows, Inc. v. County of Los Angeles (2002) 27 Cal.4th 853, 860-861.) We are reluctant to invoke the doctrine of implied preemption. "Since preemption depends upon legislative intent, such a situation necessarily begs the question of why, if preemption was legislatively intended, the Legislature did not simply say so, as the Legislature has done many times in many circumstances." (California Rifle & Pistol Assn. v. City of West Hollywood (1998) 66 Cal.App.4th 1302, 1317.) " 'In determining whether the Legislature has preempted by implication to the exclusion of local regulation we must look to the whole purpose and scope of the legislative scheme.' " (San Diego Gas & Electric Co. v. City of Carlsbad (1998) 64 Cal.App.4th 785, 793 citing People ex rel. Deukmejian v. County of Mendocino (1984) 36 Cal.3d 476, 485.) Indeed, preemption will not be implied where local legislation serves local purposes, and the general state law appears to be in conflict but actually serves different, statewide purposes. (San Diego Gas & Electric v. City of Carlsbad, supra, at p. 793.) There is a presumption against preemption: " 'it is not to be presumed that the [L]egislature in the enactment of statutes intends to overthrow long-established principles of law unless such intention is made clearly to appear either by express declaration or by necessary implication.' [Citations.]" (Big Creek Lumber Co. v. County of Santa Cruz, supra, at pp. 1149-1150 citing County of Los Angeles v. Frisbie (1942) 19 Cal.2d 634, 644.)
Hotels challenge the Ordinance as expressly contradicting the Labor Code and impliedly entering a field fully occupied by general state law. To resolve these preemption issues, we consider the statutory scheme of the Labor Code provisions governing gratuities, and the Ordinance, each on its own terms. (Sherwin-Williams Co. v. City of Los Angeles, supra, 4 Cal.4th at p. 897.) Finally, we "measure the latter against the former" to determine whether a conflict exists. (Ibid.) As shall be discussed, we do not find a conflict.
B. The Gratuity Provisions In Sections 350 To 356
The Labor Code sections are a comprehensive statutory scheme regulating gratuities. Our focus is on two specific statutory provisions, addressing the disposition of a gratuity, and defining the term "gratuity." (§§ 350, subd. (e); 351.) Section 351, addressing the disposition of gratuities, states in pertinent part: "No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer. Every gratuity is hereby declared the sole property of the employee or employees to whom it was paid, given, or left for. . . ." (§ 351.)
A "gratuity," as defined in section 350, subdivision (e), is "any tip, gratuity, money, or part thereof that has been paid or given to or left for an employee by a patron of a business over and above the actual amount due the business for services rendered or for goods, food, drink, or articles sold or served to the patron. . . ." (§ 350, subd. (e).)
These statutes ensure that gratuities are not used by an employer to satisfy wage obligations. (Etheridge v. Reins Internat. California, Inc., supra, 172 Cal.App.4th at pp. 914-915 (maj. opn. of Croskey, J.); id. at p. 930 (conc. & dis. opn. of Klein, P.J.); ...