Has FMLA/CFRA been good for the workplace?

Ever since FMLA went into effect in 1993, it has been a success. A U.S. Department of Labor report issued in June 2007 found employee reactions to FMLA to be uniformly positive. The report referenced a 2000 Westat Report which had found that “89% of employers reported that the FMLA has had either a positive or neutral effect on employee morale”. Numerous employees also commented that FMLA encouraged a “greater sense of loyalty to their employer”.

Nevertheless, some argue that FMLA/CFRA does not go far enough. I have already posted about how U.S. leave policies continue to lag far behind those of other countries around the world. See “U.S. FMLA/CFRA Leave Lags Far Behind Rest of World”. The AFL-CIO also cites a national survey conducted by the National Opinion Research Center of the University of Chicago which found:

1. the U.S. ranks at the bottom of 21 high-income nations in providing parental leave for workers
2. 1 in 6 workers were fired, disciplined or threatened by their employer for taking time off for illness or to care for a sick family member
3. Nearly 50 percent of private-sector workers and 76 percent of low-income workers have no paid sick days

It isn’t hard to understand why better leave policies would be better for everyone. According to Deborah Leff, president of the Public Welfare Foundation, paid sick leave is not only good workplace policy, but “good public health.”

The lack of paid sick days has real consequences for Americans forced to choose between losing a day’s pay or going to work sick. It’s difficult for employees to be productive when they are not well. They also expose co-workers and customers to illnesses.
“Sick and Fired: U.S. Workers Struggle Without Paid Sick, Parental Leave”

Employers complain that leave policies can be difficult to administer and that leave abuse is rampant.

Marc Freedman, director of labor law policy for U.S. Chamber of Commerce, had this to say:

It’s just too confusing and too vague. Right now, the system is such that it allows an employee who wishes to, to game the system.
“Do employees abuse the Family and Medical Leave Act?”

But employers should be asking themselves, is it really in their interests to have sick employees or employees with sick family members reporting to work for fear of losing pay or their jobs? Because the data suggests that that is exactly what is happening. The Institute for Women’s Policy Research conducted a study that concluded improved medical leave laws could save the U.S. economy $8.1 billion a year by preventing lost productivity due to sick workers, the spread of illness to co-workers and customers and worker turnover.

Besides, a suspicious employer can always ask the employee to undergo a second examination in order to get a second opinion whether medical leave is really justified. It is difficult to understand why more employers don’t take advantage of this little-used regulation.

If you believe your employer has interfered with or retaliated against your medical leave rights, contact a lawyer right away as strict filing deadlines may apply.

Related posts:

1. Leave Rights in California: Part 1
2. FMLA Medical Leave Expanded to Families of Military
3. U.S. FMLA/CFRA Leave Lags Far Behind Rest of World

Am I eligible?

Unfortunately, FMLA/CFRA does not protect all workers, only those who have:

• worked at least one year for their employer,
• have worked at least 1,250 hours in the past year, and
• whose employer has at least 50 employees working within 75 miles of the employee’s worksite.

According to U.S. Department of Labor June 2007 report, the eligibility requirements for FMLA/CFRA means that only 76.1 million workers out of 141.7 million total U.S. workers, or 53%, are eligible for FMLA protection (the other 47% have to rely on their employer’s leave policies).

How much medical leave is allowed under FMLA/CFRA?

Under FMLA/CFRA, employees are entitled to take a maximum of 12 weeks of unpaid medical leave to care for a newborn, newly adopted child, seriously ill family member or for their own serious illness (under FMLA but not CFRA, this includes incapacity due to pregnancy, childbirth or related medical conditions). You may be entitled to an extension of leave past the 12 week maximum if you have a mental or physical disability that requires a leave extension as an accommodation of that disability (this assumes the employer is aware or has been informed of your disability and/or associated work restrictions). It is illegal for an employer to treat you differently or punish you for taking medical leave. You also have a right to be reinstated to your position upon return from your medical leave unless you are a “key employee”.

Is the leave paid or unpaid?

FMLA/CFRA (and PDLL) leaves are unpaid. According to the AFL-CIO, the lack of paid leave ”presents a significant obstacle for those who cannot afford to take FMLA leave”. This claim is backed up by a 2000 Westat Report which found that the most commonly noted reason for not taking leave was inability to afford it.

Of course, if you’re lucky, your employer will choose to pay you during such leaves, or apply your paid sick leave/vacation time to your medical leave.

What if I’m pregnant?

If you are incapacitated due to pregnancy, childbirth or related medical conditions, you may qualify for 4 months of leave under the California Pregnancy Disability Leave Law (PDLL). You can then take an additional 12 weeks of CFRA (but not FMLA) leave “for reason of the birth of her child, if the child has been born by this date” and assuming you have enough time left in your CFRA bank. 2 Cal. Code of Regs. § 7291.13(c).

Note, the above eligibility requirements for FMLA/CFRA do not apply to PDLL. To qualify for PDLL, you need only work for an employer who has 5 or more employees.

Conclusion

In Part 2, I will discuss whether FMLA/CFRA has been good for the workplace and what further improvements can and should be made, if any.

If you believe your employer has interfered with or retaliated against your medical leave rights, contact a lawyer right away as strict filing deadlines may apply.

Related posts:

1. Leave Rights in California: Part 2
2. FMLA Medical Leave Expanded to Families of Military
3. U.S. FMLA/CFRA Leave Lags Far Behind Rest of World

Under the law, there are two main types of sexual harassment:

“Sleep with me if you want to keep your job”

Quid pro quo sexual harassment is the type of harassment people are most familiar with. “Quid pro quo” is Latin for “this for that”. This form of sexual harassment involves a supervisor conditioning employee benefits, such as promotions, benefits or continuation of employment itself, on the employee’s acceptance of the supervisor’s harassing conduct, e.g., sexual advances.

There is probably not a more blatant form of employer exploitation of his superior position over a subordinate and the law is correspondingly harsh toward this type of harassment. Under California law, the employer is strictly liable for the sexual harassment of the supervisor and has no special legal defenses available to it. A successful plaintiff can recover lost wages and compensation of other economic losses, emotional distress damages, interest and attorney fees, and in cases where the employer’s officers, directors or managing agents knew of the harassment, punitive damages intended to punish or deter the employer.

Hostile work environment sexual harassment

Hostile work environment sexual harassment (HWE) consists of harassing conduct that is so severe or pervasive that it creates a hostile work environment for employees. Supervisors, co-workers, even subordinates can engage in conduct that gives rise to HWE. Harassing conduct includes slurs, taunts, intimidation, ridicule, groping, grabbing, etc.

Notice the requirement is not severe AND pervasive, but severe OR pervasive, meaning that a single instance of harassing conduct could create a hostile work environment if it is severe enough. Alternatively, a campaign of multiple acts of subtle harassment could collectively create a hostile work environment if it is pervasive enough.

The employee does not have to be the direct target of the harassing conduct in order to file a claim. For instance, a woman who witnesses her female co-workers being groped and propositioned can bring a claim for hostile work environment sexual harassment.

Recently, the California Supreme Court held that employer actions, such as termination, demotion, etc., could also constitute hostile work environment harassing conduct. See Roby v. McKesson HBOC (2009) 146 Cal.App.4th 63.

Harassment by supervisors and co-workers

If the harassment is by a supervisor, under California law, the employer will be on the hook under strict liability. If the harassment is by a co-worker, however, the employer will only be on the hook if a supervisor knew or should have known of the harassment and failed to take immediate and appropriate corrective action.

Federal law diverges from California law here in an unwelcome direction. Under Title VII of the Civil Rights Act of 1964, when a supervisor engages in hostile work environment harassment that does not involve tangible employer actions (e.g., termination, demotion), the employer can escape liability for HWE if the employer can show 1) employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior and 2) the employee unreasonably failed to take advantage of the preventive or corrective opportunities provided by the employer, or to avoid harm otherwise. See Burlington Industries, Inc. v. Ellerth (1998) 524 US 742, 764–765; Faragher v. City of Boca Raton (1998) 524 US 775, 806. This is unfortunate in that many victims of sexual harassment do not immediately report it to their employers for fear of retaliation. Under federal law, these employees may be out of luck. This is one of the reasons why filing a sexual harassment claim under California rather than Federal law is usually the better course.

Conclusion

Sexual harassment law offer strong protections in California and victims should not be afraid to fight back. As always, it is best to talk to a lawyer as soon as possible. This is particularly true given that strict filing deadlines apply (180 days to file a charge with the Equal Employment Opportunity Commission and 1 year to file a charge with the California Department of Fair Employment and Housing). Many lawyers offer free and confidential consultations, so don’t wait.

Related posts:

1. LAPD Hit with $2.3 Mil. Sexual Harassment Jury Verdict
2. Discrimination Laws in California
3. Dukes v. Wal-Mart: 9th Circuit Upholds Class Certification in $11 Billion Sexual Discrimination Case

Types of Discrimination

Discrimination comes in many flavors. There is “disparate treatment” and “disparate impact” discrimination – meaning an employee is treated differently because they are a member of a protected class.

“Disparate treatment” involves employer actions, e.g., promotion and termination, that single an employee because of a protected characteristic, e.g., only older workers are laid off or only males are promoted.

“Disparate impact” involves employer policies that have a disproportionate adverse effect on a protected characteristic group, e.g., a company policy of counting all absences and leaves against seniority that has a disproportionate adverse impact on women who have to take time off for pregnancy.

Then there is “harassment”, meaning harassing conduct such as slurs, touching, unwanted advances, intimidation, etc., because of the employee’s protected characteristic.

Harassment can be “hostile work environment” harassment, meaning harassing conduct that is so severe or pervasive that it creates a work environment that is hostile or abusive.

And in the case of sexual harassment, harassment can be “quid pro quo” (Latin for “this in exchange for that”), which refers to a situation where the employee’s supervisor has conditioned job benefits, such as a promotion or continuation of employment, on the employee’s accepting the supervisor’s sexual advances or conduct, e.g., a supervisor forcing a subordinate to sleep with him to keep her job or get a promotion.

If the harasser is the employee’s supervisor, the employer will be held strictly liable for the supervisor’s misconduct. If the harasser is the employee’s co-worker, however, the employer will be held liable only if a supervisor knew or should have known of the harassment and failed to take immediate and appropriate corrective action.

Federal versus State laws

Federal law, which includes the Age Discrimination in Employment Act, Equal Pay Act of 1963, Title VII of the Civil Rights Act of 1964, and the Americans with Disabilities Act, is generally less favorable to employees than California’s Fair Employment and Housing Act, which doesn’t have damage caps, limited attorney fee provisions, restrictive legal burdens of proof or special employer defenses.

Also, federal law typically requires the employee to file an administrative charge with the Equal Employment Opportunity Commission (EEOC) within a mere 180 days from the date of the discriminatory violation whereas California’s Fair Employment and Housing Act gives the employee 1 year to file such a charge with the California Department of Fair Employment & Housing (DFEH).

Damage Awards

An employee who wins a discrimination lawsuit is entitled to recover several types of compensation, such as lost wages, emotional distress, litigation costs and statutory attorney fees. An employee could also recover punitive damages which are designed not to compensate the employee but to deter and punish the employer.

Conclusion

Discrimination laws, especially in California, offer powerful and effective protections for employees. However, discrimination laws are changing constantly, sometimes day-by-day, and can be difficult to navigate. If you think you have a discrimination case, do not wait. Strict time limits may apply. Contact a lawyer right away.

Related posts:

1. Filing a Discrimination Complaint in California
2. And the Winner for Most Popular Discrimination Complaint in the US Is . . .
3. Free Pamphlets on Labor and Employment Laws

The good news is that almost all employment contracts require you to answer the same few basic questions.

Is the Contract the Final Word?

Look for a sentence at the end of the contract that says something like the following: “This Agreement contains the entire agreement between the parties with respect to the subject matter hereof. Each party acknowledges that it has not relied on any representations or promises except as set forth herein. Any and all prior negotiations, discussions, agreements, or understandings, whether written or oral, are merged into and are superseded and displaced by this Agreement.” The contract might also have a section called “Merger” or “Integration” or “Prior Understandings Superseded”.

This means that everything you were told and thought when you signed the contract is irrelevant. The only thing that matters is what’s contained in the four corners of the paper on which the contract is written.

Of course, the opposite is true too. If the contract does not contain the above, then all the emails and conversations you had with your employer when you signed the contract would be considered by a judge in interpreting the contract’s terms.

What Happens if Someone Violates the Contract?

The contract may have a section called “Breach”, but more often, the contract will build in the consequences of contractual violations into the “Termination” section, since termination of employment is the usual response to a violation. There may be other consequences too. You may be required to re-pay the employer for any training they have invested in you. Or you might be on the hook for a monetary sum called “liquidated damages”.

You will also want to look for a section called “Dispute Resolution” or “Arbitration”. Or it might be in a section called “Miscellaneous”. In any case, the relevant language will likely be near the end of the contract. This section sets out the procedures the parties have to follow if the contract is violated or a dispute otherwise arises under the contract. Sometimes the contract will require the parties to engage in a multi-step process of first trying to work things out themselves, and failing that, hiring a mediator or arbitrator. Other times the contract will require the parties simply to file any lawsuit in a certain jurisdiction.

This can a real trap for employees if they’re living and working in one state but the contract requires them to file a lawsuit all the way on the other side of the country. I’ve also discussed the downsides of arbitration for employees several times in other posts: “Is Arbitration Good or Bad for Employees?” and “Arbitration Works Better than Lawsuits . . . But for Whom?”

Another thing to watch out for: the contract may require the party who loses the dispute to pay for the costs and attorney fees of the prevailing party. Given attorneys can charge anywhere from $200 to $1,000 per hour, this can add up fast for the losing party.

What Obligations Continue after the Contract Ends?

After the contract expires or is early terminated, you may not be completely off the hook. The contract may have a “noncompete” clause that prohibits you from working for another employer in the same industry within a certain geographic region and/or for a certain period of time. Noncompete clauses are generally unenforceable in California but that doesn’t stop employer from including them in contracts so you should keep an eye out for them.

The contract could also have continuing confidentiality obligations that require you to preserve and protect from disclosure any confidential information and/or trade secrets you acquired during your employment. If you fail to comply, the contract may require you to pay a certain amount of money to the employer, so-called “liquidated damages”.

Final Words of Advice

This post contains a lot of information but, remember, it’s no substitute for a trained lawyer. There’s a reason “Contracts” was a year-long course in law school and why contract breach lawsuits constituted a third of all civil trials according to the U.S. Bureau of Justice Statistics‘ 2005 national survey of trials conducted in general jurisdiction courts across the country. If you have a question about a contract, need help negotiating one, or are faced with a contract breach, either by you or your employer, talk to a lawyer.

Related posts:

1. How to Read an Employment Contract: Part 1
2. Can My Employer Break My Employment Contract? Can I?
3. Free Video Tutorials on Employment & Labor Laws

The good news is that almost all employment contracts require you to answer the same few basic questions.

When Will the Contract End? Can It Be Renewed?

Sometimes the contract will make it easy for you to find the answer to this question by having a section called “Term”, “Duration” or “Renewal”. Other times, you will have to hunt around a little. If the contract doesn’t have an expiration date, that could be cause for concern. Slavery and forced labor is, of course, not permitted in the U.S. Still, it’s generally a good idea for a contract to have an expiration date so that there is no confusion.

If the contract has one, you will want to know what the procedure for renewal will be. Sometimes the contract has an “evergreen” provision that makes renewals automatic. Other times, the contract will require one or both of parties to agree to it or negotiate a new contract.

Can the Contract Be Terminated Early and by Whom?

Look for a section called “Termination”. Most contracts will have one. If the contract is drafted by the employer, as is nearly always the case, then the contract will probably permit the employer to early terminate the contract 1) for or with “cause”, which means a “good reason” such as poor performance, fraud, disloyalty or misconduct by the employee, 2) “without cause”, which means the employer doesn’t need a reason to terminate you (in California, employment is presumed to be “at will” unless proven otherwise), 3) due to economic conditions, i.e., a “layoff”, etc. Sometimes the contract will require the employer to give you a certain amount of advance notice of the decision to terminate, say 30 days.

The contract may also give you the employee the power to early terminate the contract, although advance notice will usually be required.

Can the Contract Be Amended or Modified and by Whom?

The contract may have a section called “Amendment” or “Modification”. Or the answer might be at the end of the contract in a section called “Miscellaneous”. You might have to hunt around a little.

Contracts typically state that any changes to the contract, i.e., “amendments” or “modifications”, have to be in writing and have to be agreed to by all the parties. This means that a casual oral statement by your boss that “you’ll have a job for life” or “we’d never fire you without a good reason” may not add up to much unless your boss is willing to put it in writing. Likewise, if your boss suddenly decides to reduce your compensation, he may be breaching your contract if you didn’t agree to a written amendment.

Which State’s Laws Govern the Contract?

Look for a section called “Governing Law” or “Miscellaneous”. In any case, this provision will usually be somewhere at the end of the contract.

Basically, this provision tells you which state’s laws control the contract. This is the case regardless of where you work, where the contract was signed, where the employer is headquartered, etc. So even if you work in New York for a company based in Delaware and you signed the contract while on vacation in Hawaii, the contract will be governed by California law if that’s what the contract says. And if a problem or dispute arises under the contract, you will then need to retain a California lawyer to assist you. Do not assume that contract laws are the same under all 50 states – they are not.

Part 2

Next, in Part 2, I will discuss what happens if someone violates the contract, what obligations continue after the contract ends, whether the contract is the final word or whether emails and conversations with your boss can be considered. Stay tuned.

Related posts:

1. How to Read an Employment Contract: Part 2
2. Can My Employer Break My Employment Contract? Can I?
3. Free Video Tutorials on Employment & Labor Laws

The California Department of Fair Employment and Housing (DFEH) publishes numerous free pamphlets on California labor and employment laws. These pamphlets provide a brief but helpful and easy-to-understand explanation of employee rights under California’s harassment and discrimination laws.

The pamphlets include the following topics:

1. DFEH-151 Discrimination
2. DFEH-159 DFEH Complaint Process
3. DFEH-161 Pre-Employment Inquiries
4. DFEH-167 Public Acess Disability Discrimination
5. DFEH-184 Disability Discrimination
6. DFEH-185 Sexual Harassment
7. DFEH-186 Pregnancy Leave
8. DFEH-187 Hate Violence
9. DFEH-188 Medical Leave

You may need to download and install Adobe Acrobat Reader in order to view the pamphlets.

If you need multiple copies, you can order more from the DFEH by filling out and submitting the DFEH order form.

Related posts:

1. Free Video Tutorials on Employment & Labor Laws
2. Discrimination Laws in California
3. California Labor Dept Org Chart

Following are the four videos in the series which the DFEH has dubbed “Equal Rights 101″:

1. Equal Rights 101: Pregnancy Discrimination and Family Leave

2. Equal Rights 101: Pre-Employment Inquiry

3. Equal Rights 101: Reasonable Accommodation of Disability and Religious Belief

4. Equal Rights 101: Workplace Sexual Harassment and Retaliation

If you have more questions about a legal issue you’re facing in the workplace, talk to a lawyer.

Related posts:

1. Free Pamphlets on Labor and Employment Laws
2. Discrimination Laws in California
3. Video: Police Strip Search of Ohio Woman Called Outrageous

California has numerous whistleblower protection laws:

1. Labor Code § 1102.5: prohibits retaliation against employees who blow the whistle to a government agency on, or refuse to participate in, violations of laws and regulations in the workplace.
2. Health & Safety Code § 1278.5: prohibits retaliation against patients, doctors, nurses and medical staff who blow the whistle to the government or accrediting agencies on medical patient care issues at a health facility.
3. Labor Code § 98.6: prohibits retaliation against employees who file a complaint for labor code violations with the Labor Commissioner or the Dept. of Fair Employment & Housing.
4. Labor Code 6399.7: prohibits retaliation against employees for filing a complaint or testifying on occupational safety and health matters.
5. Gov’t. Code 12653: prohibits retaliation against employees who report to the government any fraudulent billings that were submitted for payment to the government.
6. Gov’t Code § 12940(h): prohibits retaliation against employees who oppose discriminatory or harassing treatment based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation.

Wrongful Termination in Violation of Public Policy: In most cases, California laws do not protect employees who report illegal activity merely to their employer. (See Green v. Ralee Eng. Co., 19 Cal.4^th 66, 87 – employees fired for reporting suspicions of illegal activity to their employer do not have a claim under Labor Code § 1102.5). Rather, the employee must actually pick up the phone and make a formal report to a government agency in order to be protected. However, California courts also recognize a common law cause of action for “wrongful termination in violation of public policy” which does protect such employees. While California is an at-will employment state, meaning employers can fire employees for almost any reason or no reason at all, California courts have long protected employees who are fired for complaining to their employers about reasonable suspicions of violations of laws and regulations. In a landmark case called Green v. Ralee Eng. Co., the California Supreme Court ruled that California law expresses a “broad public policy interest in encouraging workplace whistleblowers to report unlawful acts without fearing retaliation”. (1998) 19 Cal.4^th 66, 77.

Typically, the whistleblower needs to prove the following in order to prevail on a whistleblower retaliation claim:

1. Whistleblower is/was an employee. In most cases, independent contractors are not protected.
2. Whistleblower blew the whistle on illegal activity to a government agency. The employee cannot merely report improper conduct; the conduct must be illegal. In Patten v. Grant Joint Union High School Dist., the court ruled that a school principal’s report to a school district that a male PE teacher was peeping in the girls’ locker room was not protected from retaliation. (2005) 134 Cal.App.4^th 1378, 1384–1385.
3. Whistleblower had reasonable cause to believe the law was being broken. A whistleblower would still be protected even if her suspicions of illegal activity turned out to be wrong. However, the key is that her suspicions had to have been objectively reasonable and subjectively sincere.
4. Whistleblower was subjected to an adverse employment action, such as termination or demotion or any other material change in the terms and conditions of their employment. A retaliatory writeup, administrative leave with pay, or sarcastic remarks probably would not qualify as adverse employment actions in most cases.
5. Retaliation for whistleblowing was a “motivating factor” in the employer’s decision to engage in the adverse employment action. Remarks by a supervisor that he intended to get even with the employee for blowing the whistle would be good evidence of this. If the retaliation followed a short time after the whistleblower blew the whistle, that would also be good evidence of retaliation. In some cases, such “proximity in time” even turns the tables on the employer so that the burden is now on them to prove that they were acting lawfully when terminating or demoting the employee.

A whistleblower who wins her case in court can recover a wide range of damages and remedies: lost wages and benefits, emotional distress, job reinstatement, punitive damages, attorney fees and costs, etc. In some cases, a whistleblower can even get double backpay (Gov’t. Code § 12653(c)). More importantly, whistleblower retaliation claims have been known to anger juries, causing them to issue unusually large awards to successful plaintiffs.

If you’re a whistleblower who has been retaliated against, you should contact a lawyer immediately as your claims are likely subject to strict legal filing deadlines.

Related posts:

1. An Ode to Whistleblowers and the Law: Part I
2. Leave Rights in California: Part 1
3. Leave Rights in California: Part 2

Some History

For better or worse, tipping has become an accepted part of American commerce. It is a practice that first emerged in the late 1800s. In 1917, the California legislature passed a law for the first time prohibiting employers from taking any portion of employees’ tips. However, the courts struck down the law as a violation of constitutional due process. The legislature tried again in 1929 and this time succeeded. However, now the law permitted employers to credit tips against employees’ wages, i.e., use tips in place of wages. It wasn’t until 1975, after repeated failed attempts, that the legislature was finally able to pass a law that prohibited the practice of “tip credits”.

Labor Code § 351

California Labor Code § 351 now reads:

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 to be the sole property of the employee or employees to whom it was paid, given, or left for.

An employer that permits patrons to pay gratuities by credit card shall pay the employees the full amount of the gratuity that the patron indicated on the credit card slip, without any deductions for any credit card payment processing fees or costs that may be charged to the employer by the credit card company. Payment of gratuities made by patrons using credit cards shall be made to the employees not later than the next regular payday following the date the patron authorized the credit card payment.

Interestingly, the federal law – the Fair Labor Standards Act – continues to permit “tip credits”, though with restrictions. As usual, California laws continue to offer greater employee protections than their federal counterparts. While federal laws usually trump or “preempt” state laws, courts have ruled that this is not the case with the FLSA and the California Labor Code. Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 567; Skyline Homes, Inc. v. Department of Industrial Relations (1985) 165 Cal.App.3d 239, 250-251.

Section 351 seems pretty simple and straightforward. However, it also left open some important unanswered questions that the courts took it upon themselves to answer.

Can My Employer Take My Tips?

Yes. . .

Many industries, particularly the restaurant industry, have a “house” practice of mandatory tip-pooling, in which the employer takes employees’ tips, pools them, then allocates the money to its employees as it sees fit. Tip pooling is nowhere mentioned in section 351 and that would therefore seem to make it an illegal “taking” of the employee’s “sole property”. However, the courts engaged in some fancy analysis to conclude it is permissible, so long as the distribution is “fair and reasonable”. Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062. So to that extent, yes, your employer can take your tips away from you.

. . . and no

But the employer can’t take any part of your tips for itself either. Even if your employer sets up a mandatory tip pool, it and its “agents” (meaning any employee with managerial/supervisory functions) are prohibited from getting any of the money from that pool. That is clearly stated at the very beginning of section 351: “No employer or agent shall collect, take or receive any gratuity or part thereof . . .”.

So Who Can Participate in the Tip Pool?

Here is where things get tricky because the courts seems to be all over the place. Section 351 makes it clear that employers and their supervisory/managerial agents cannot get any of the money from a tip pool. But it is unclear what other employees can. Can the tip pool monies be allocated to dishwashers? Busboys? Sushi chefs? Janitors? Accountants? Security guards? Etc. Where do you draw the line?

Since 1990, the bright-line rule was that only those employees who are involved in “direct table service” are entitled to participate in the tip pool. Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062. However, that all changed recently.

In March 2009, a court held that employees who did not engage in direct table service could still participate in the tip pool, so long as they were in the broader “chain of service”. Etheridge (Brad) v. Reins International California, Inc. (2009) 172 Cal. App. 4th 908. So, for instance, bussers who clear away plates after a customer has already left might not qualify as having engaged in “direct table service” but would qualify as having been involved in the “chain of service”, and so could participate in the tip pool. Another court held that bartenders could participate in tip pools, even if they never directly brought drinks to the customer’s table (although there the court stuck with the old model and ruled that this was “direct table service”). Budrow (Aaron) v. Dave & Buster’s of California, Inc. (2009) 171 Cal. App. 4th 875.

In June 2009, a court reversed an $86 mil. judgment when it held that supervisory/managerial agents could share in “collective tip boxes” because they were not “tip pools” but “tip allocations”. Chau v. Starbucks Corp., 174 Cal. App. 4th 688 (Cal. App. 4th Dist. 2009). I call this one the “Starbucks exception” because it only seems to apply if you work at Starbucks.

So the question of which specific employees can participate in a tip pool remains up in the air, to be answered on a case-by-case basis. The key for the courts is the intent of the tipping customer. If the tipper (arguably) intended that a type of employee share in the tip, then they are participants in the “chain of service” and/or “direct table service”. An accountant or security guard probably would not qualify under this standard, but a bartender and busser probably do.

My Employer Has Violated the Tip Laws, Can I Sue?

Yes you can. At the moment, it is unclear whether you have a private right of action under section 351. The California Supreme Court is considering that question at the moment. Lu (Louie Hung Kwei) v. Hawaiian Gardens Casino, Inc., 2009 Cal. LEXIS 5505 (Cal. May 26, 2009).

However, as your lawyer can explain to you, you can still probably bring a claim for violation of the California Unfair Competition Law (California Business & Professions Code 17200 et al.) and/or for penalties under the California Private Attorney General Act (California Labor Code § 2698 et al.). But I recommend you leave that to your lawyer.

Related posts:

1. Can My Employer Break My Employment Contract? Can I?
2. Can My Employer Monitor My Web Surfing or Emails at Work?
3. What Does Your Employer Know About You?