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Thursday, July 18, 2024 | Back issues
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Pooled Tips Upheld for California Casino

SAN JOSE, Calif. (CN) - A casino that forces card dealers to participate in a tip-pooling scheme does not violate California labor laws, a state appeals court ruled.

Bay 101, a San Jose card room operated by Sutter's Place Inc., has long required dealers to put a set amount of their tips in a common account, which the casino then distributed to its other employees each payday.

The policy once required poker dealers to contribute $2.50 per hour to the pool, while dealers on the "California games" side had to contribute $5 per hour.

Over time, the casino eventually required all dealers to contribute $2.50 for every hand they dealt to the pot, which was distributed to non-dealer employees.

Dealers received between $750 and $1,500 in tips each week, and none of the dealers handed over more than 15 percent of the tips they received on any given day. Sutter's also requires dealers to sign a tip-pooling agreement before they can start working for the casino.

After Bay 101 filed for bankruptcy in 2004, Haim Avidor filed class proofs of claims. Eventually, he filed suit in state court claiming that the tip-pooling scheme illegally took tips patrons had given to dealers.

Between 2007 and 2011, a Santa Clara County judge gutted much of Avidor's original suit, dismissing contract, labor code and conversion claims. After a jury trial, the court granted Bay 101's nonsuit motion on the dealer's money had-and-received claims, and dismissed the unfair business practices count, entering final judgment for the casino.

Avidor insisted that California labor law prevents employers from divesting its employees of gratuities, but the Sixth Appellate District affirmed last week.

From its earliest form, California labor code allows employers to deduct from tips "as long as the employer conspicuously displayed a notice informing the public of that practice," Justice Franklin Elia wrote for a three-member panel.

Avidor also failed to show that he had been improperly barred from introducing evidence of "tipper's intent" - where tips are handed directly to the dealer, as opposed to left on an empty table like at a restaurant.

"In pretrial proceedings he readily acknowledged that customer intent is irrelevant when patrons give tips directly to dealers, which is exactly the situation presented here," Elia wrote. "It makes no difference whether tips 'left' in other settings, such as restaurants, are intended for just the server, for those providing direct table service, or for any employee designated by the employer (excluding the employer's agent) to share tips." (Parentheses in original.)

Elia continued: "Absent any indication that legislative acceptance of employer-mandated tip pooling is confined to restaurants and similar establishments, we cannot see why the practice should be foreclosed in the casino setting. ... Given the absence of legislative intent to prohibit employer-mandated tip pooling, we cannot conclude that the policy at Bay 101 is illegal as a matter of law."

Avidor also failed to provide evidence that Bay 101 handed some of the tip pools to its managers - which would violate California law, the appellate court said.

"If, as we have concluded, dealers can be required to drop a set amount into a pool for other employees, it makes no difference to their position that some recipients should be disqualified," Elia wrote. "Because plaintiff could not establish a violation of [labor code], the trial court properly granted judgment in favor of Bay 101 on plaintiff's unfair business practices claim."

Bay 101 warned dealers of the practice during new-hire orientation, and required employees to sign the tip-pooling agreement before their first shift, according to the ruling

"The dealers acknowledged and agreed to the condition of employment that they would make the 'drop' after each shift by contributing a specified amount of their accumulated tips to the tip pool," Elia wrote. "They understood that this amount was not going to be returned to or kept for them, but would be distributed to other casino employees. Because this arrangement did not violate [labor code], the trial court correctly determined, based on undisputed facts, that the dealers did not have ownership or possessory rights in that money. The conversion cause of action was therefore properly adjudicated as a matter of law."

Elia concluded: "It is not the customers' intent that is relevant here, but the intent of the dealers in contributing to the tip pool. According to the testimony of plaintiff and other members of the class who testified, each dealer dropped the required amount not only with the understanding of its purpose but with the intention that this money be used for the benefit of the nondealer employees in the recipient categories. As the parties stipulated before trial, every dealer was aware of the tip policy and the amount, method, and purpose of the dealer drop. There can be no question that in carrying out the tip policy, dealers intended that the money they dropped be distributed among the pool recipients."

The court's opinion mirrors a 2009 ruling concerning Hawaiian Gardens Casino. The Second Appellate District found in that case that nothing in state labor law prohibits employers from pooling tips unless managers benefit from the policy.

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