This month, the California Supreme Court held unanimously that Section 351 of the California Labor Code does not create a private right of action for employees. In Lu v. Hawaiian Gardens Casino, Inc., 2010 Cal. LEXIS 7623 (Cal. Aug. 9, 2010), a card dealer in a casino alleged that his employer’s mandatory tip-pooling program violated Section 351, which prohibits employers from taking any part of a gratuity left for an employee and provides: “Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.” The trial court dismissed the claim, holding that Section 351 did not provide a private right to sue, and the Court of Appeal affirmed. However, another Court of Appeal expressly disagreed with that holding several months later, creating a conflict that the Supreme Court has now resolved.
The Court first noted that there is not always a private cause of action for violation of a statute and that the question is whether the Legislature has “manifested an intent to create such a private cause of action.” Because the language of Section 351 neither expressly created a private right of action nor referred to a specific existing remedy for violations, the Court looked to the legislative history and found “no clear indication that the Legislature intended to create a private cause of action under the statute.” In such a case, the Court held that the party claiming such a right “bears a heavy, perhaps insurmountable, burden of persuasion.” The plaintiff failed to meet that burden. The Court rejected his arguments that the Legislature “implicitly created” a private right of action, and the Court distinguished an earlier case suggesting that courts may imply a private right of action, Katzberg v. Regents of Univ. of Cal., 29 Cal.4th 300 (Cal. 2002), holding that Katzberg applied only to constitutional violations rather than statutory violations. Finally, the Court noted that employees are not without a remedy for violation of Section 351, because the Department of Industrial Relations may prosecute employers for misdemeanor violations of the Labor Code, a common law conversion action may be available to employees “under appropriate circumstances,” and the Legislature may choose to create a private right of action if it wishes to do so.