Thursday, September 9, 2010

Second District Concludes Los Angeles Ordinance Requiring LAX Hotel Employees Retain Service Charge Funds Not Preempted By Labor Code Tip Provisions: Garcia v. Four Points Sheraton Lax

On September 8, 2010, the Second District Court of Appeal (Division Three) reversed a trial court order concluding that the Los Angeles Hotel Service Charge Reform Ordinance was preempted by Labor Code sections 350 through 356, which govern the disposition of gratuities. See Garcia v. Four Points Sheraton Lax, __ Cal.App.4th __ (2010). The Ordinance was enacted by the City of Los Angeles to require non-unionized hotels in the Century Corridor near LAX to pass along the mandatory service charges to workers who render the services for which the charges have been collected:
Section 184.02 states in pertinent part: "Service Charges shall not be retained by the Hotel Employer but shall be paid in the entirety by the Hotel Employer to the Hotel Worker(s) performing services for the customers from whom the Service Charges are collected." (LAMC, § 184.02, subd. (A).) Service charges may not be paid to "supervisory or managerial employees," and must be paid to "Hotel Worker(s) equitably and according to the services that are or appear to be related to the description of the amounts given by the hotel to the customers." n6 (LAMC, § 184.02, subd. (A).) Service charges collected for banquets or catered meetings "shall be paid equally to the Hotel Workers who actually work the banquet or catered meeting"; service charges collected for room service "shall be paid to the Hotel Workers who actually deliver the food and beverage associated with the charge"; and service charges collected for porterage services "shall be paid to the Hotel Workers who actually carry the baggage associated with the charge." (LAMC, § 184.02, subd. (A)(1)-(3).) Gratuities and tips left by customers for a hotel worker are excluded.
Slip Opinion, at 8-9.

In concluding that the Ordinance was not preempted, the Court reasoned that “a service charge by definition is not a gratuity” under Labor Code Section 350, and rejected outright the hotel employer’s counter argument that this finding would vest them with a property right to such funds under Section 351. See id., at 10-11 (“We do not read section 351 or any other provision in the Labor Code governing gratuities to address employers' property rights.”).

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