©2024 Seyfarth Shaw LLP www.seyfarth.com 2024 Cal-Peculiarities | 249 The hazard pay laws (known to many employers as “hap-hazard” laws) also commonly contained the following features. Anti-retaliation: Most ordinances stated that employers could not discharge employees, reduce their compensation, or otherwise discriminate against them for asserting their rights under the ordinances. Credit for previous employer-initiated hazard pay: The ordinances typically allowed employers who were voluntarily providing hazard pay to offset the amount already being paid against the mandated additional pay. The credit typically must have been clearly identified on wage statements. Enforcement: Most ordinances empowered not only local enforcement officials but also employees to sue the employer for violations of the ordinance. Notice: The ordinances usually required employers to post a notice in a conspicuous spot at the workplace, to provide a copy of the notice to employees, or both. 7.18 Tips In America generally, employers may use a “tip credit” by which they can count the amount of tips that customers leave for employees toward payment of the employee’s minimum wage: federal law and many state laws permit an employer to pay a tipped employee a sub-minimum base wage as low as one-half the minimum wage, provided that the amount of tips brings the actual wage up to the minimum wage.428 In California it’s different. A California statute forbids any employer to take any “gratuity or a part thereof … left for an employee by a patron, or … require an employee to credit the amount … of a gratuity against … the wages due the employee.” “Every gratuity” is the “sole property of the employee” for whom it was left.”429 Accordingly, employers of California service employees encounter a triple whammy. First, the state minimum wage is considerably higher than the federal minimum wage (see § 7.2). Second, the tip credit permitted by federal law is forbidden under California law: every “gratuity” becomes the sole property of the employee to whom it is paid, regardless of the base rate of pay, which means that the employee must receive at least the minimum hourly wage in addition to how many tips the employee receives.430 Third, certain limitations apply to any “tip pooling” scheme.431 For example, tips from the pool must not go to any “agent” of the employer.432 The California Supreme Court has held that service employees lack a statutory right to sue for unlawful tippooling,433 but suggested that employer diversion of gratuities might be tantamount to actionable conversion.434 And a 2019 Court of Appeal decision suggested further remedies, including a claim for restitution under the Unfair Competition Law.435 In that case, food and beverage banquet service employees alleged that the banquet facility’s “mandatory service charge” of 21 percent should have gone exclusively to service staff but instead went to the employer and to managers and other non-service employees, even though the customers paying this charge reasonably thought the charge was a gratuity for service staff. The plaintiffs sought restitution and sued for interference with contract and for breach of implied contract. The Court of Appeal, finding “service charge” a vague term, rejected the employer’s argument that a “service charge” can never be a gratuity.436 The Court of Appeal concluded that the allegations supported a claim that customers intended the service charge to be a gratuity for the service staff, not management, and permitted the lawsuit to proceed. The court held the core question was whether “a reasonable customer would believe the charge was a gratuity intended for the benefit of” the class of employees in question. In assessing whether a
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