California restaurateurs received a huge victory from the Second District appellate court’s ruling in Budrow v. Dave & Buster’s Of California, Inc. The lawsuit against Dave & Buster’s alleged that its tip pool policy violated California law in that it required employees to tip out bartenders who did not provide "direct table service." The court rejected Plaintiff’s argument that an employee had to have “direct table service” in order to validly participate in the tip pool.  As previously written, this is the second appellate court decision that reached the same result.

The court first explained that Labor Code section 351 does not impose a “direct table service” requirement on tip pools. The court explained that are two parts of Labor Code section 351 that are relevant to the “direct” and “indirect” table service issue. First, section 351 provides that “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.” Second, section 351 also provides that “[e]very gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.” Based on a plain reading of the Labor Code, the court rejected Plaintiff’s argument that there had to be direct table service for all employees who were a part of the tip pool.

Plaintiffs also argued that the “direct table service” requirement was established by prior case law in Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062. The court rejected Plaintiff’s argument on four grounds:

  1. The Old Heidelberg case does not define “direct” as opposed to “indirect” service. The court noted that a bartender pouring a drink at the bar could be considered as providing direct table service. The court also noted that Old Heidelberg relied upon “industry practice” of tipping 15% to busboys and 5% to bartenders. Therefore the court could not agree that Old Heidelberg even defined “direct table service” for use as a requirement in this analysis.
  2. The “references to direct table service are made in Old Heidelberg without any attempt to fashion a rule that would limit tip pools to servers and busboys.”
  3. Old Heidelberg did not establish who which employees, if any, are to be excluded from the tip pools.
  4. Old Heidelberg did not decide which limitations on the types of employees are allowed to participate in tip pools, nor did it set forth “criteria or standards” to establish these limitations.

Therefore, the court held that there was no standard that only employees who provided direct table service are those who could participate in tip pools.

The court explained that “[t]ip pools exist to minimize friction between employees and to enable the employer to manage the potential confusion about gratuities in a way that is fair to the employees.” And the artificial distinction between “indirect” and “direct” table service is of no help.

The opinion can be downloaded from the court’s website for a short period of time in PDF or Word.

I am sure HR managers have their share of funny interviewing tales – but I recently came across the How To Nail An Interview website (via Seth Godin).  The author of the site staged a fake company to see what type of applicants he would have for an open "marketing coordinator" position.  He recorded the interviews (yes – the first idea I had was if this was legal, but the author says he disclosed the fact that the participants might be recorded).  The outcome is hilarious.  

Readers should visit How To Nail An Interview, but here are a couple of my favorite interviews from the site.

Too much information on a Facebook profile :

https://youtube.com/watch?v=SjJjQ2sXfuQ%26hl%3Den%26fs%3D1

Employee who does not want responsibility:

https://youtube.com/watch?v=WJisIHXvmRs%26hl%3Den%26fs%3D1

 Another California Court of appeal ruled on the issue of tip-pooling in California. In Etheridge v. Reins International California, Inc., the court held that employees who do not provide “direct table service” may participate in tip-pools mandated by employers. (This holding confirms another recent appellate court’s ruling in Budrow v. Dave & Buster’s Of California, Inc. on the same issue.)

The court set forth the issue in the case:

Tip-pooling, a practice by which tips left by patrons at restaurants and other establishments are shared among employees, is a common practice throughout California and the nation. No California statutes expressly address the practice. In this case, restaurant servers challenge the legality of a mandatory tip-pooling arrangement, whereby, as a condition of their employment, the servers must share tips with certain other employees at the restaurant. While the servers do not contest the requirement that bussers share in the tip pool, they challenge the inclusion of employees who do not provide “direct table service.”

The complaint alleged that Reins has a mandatory tip pooling policy by which its servers are required to “tip out” certain categories of Reins’s employees who do not provide direct table service. Specifically, it is alleged that servers are required to pay a share of their tips to the kitchen staff, bartender, and dishwashers.

Plaintiff alleged that because the tip-pooling policy at issue mandated that employees who do not provide direct table service (such as the kitchen staff) participate in the mandatory tip-pool violates Labor Code section 351, which governs gratuities.  

Tip Credits vs. Tip Pools

The Court clearly explained that tip credits and tip-pools are two different items and should not be confused. Tip credits, where the employer applies a portion of the employees’ tips against the employer’s obligation to pay minimum wage (which were not an issue in this case), are not valid in California:

The first is a practice known as a “tip credit,” by which an employer credits a certain amount of the tips received by an employee against the employee’s wages. In other words, when using a tip credit, the employer pays the employee less than minimum wage, with the understanding that the employee’s tips will make up the difference. As will be discussed at length, tip credits against minimum wage are permissible under the federal Fair Labor Standards Act (29 U.S.C. § 203(m)); tip credits against minimum wage were once permitted under California law, but were subsequently prohibited by statute. (Henning v. Industrial Welfare Com. (1988) 46 Cal.3d 1262, 1270-1275.)

Under tip pooling, employees who receive tips share the tips with other employees in the restaurant. As the court explained, there are different types of tip pooling arrangements:

This case raises the issue of precisely which other employees may participate in a tip pool. In one type of tip pool, the pool is designed to spread the risk of low tipping patrons among all tipped employees; thus, only tipped employees may participate in tip pools. In another type of tip pool; the pools are designed to share tips with non-tipped employees who are considered deserving of tips, but who, for some reason (perhaps tradition, or location) are generally not tipped by patrons.

Labor Code Section 351 – Gratuities

The primary issue of the case is the interpretation of Labor Code section 351.  The court examined the first California court opinion that addressed the validity of tip pools, Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062. The court noted that while the Leighton court was primarily resolving the issue of requiring servers to "tip-out" bussers, that ruling also held that bartenders could participate in tip pools.  The Leighton court also stated that tips belong “to the employee[s] who contributed to the service of that patron.” Therefore, the court held that Leighton’s holding and rational extended to all employees who contribute to the service of customers, not just those who provide direct table service. 

The court also held that common sense dictates all employees should be able to participate in a tip-pool:

But a “direct table service” limitation would allow a busser to participate in a tip pool if the busser clears the plates while the patron is still seated at the table, but not to participate if the busser waits until after the patron has departed. The work is the same; the next patron still starts his dining experience with an equally clean table, but the busser who cleans between patrons would be barred from participating in the tip pool because he does not personally interact with any patrons. This illogical result casts doubt on any “direct table service” requirement.

Is this the last word on tip-pools in California? 

Probably not. Judge Croskey, who provided a concurring opinion, and Judge Klein, who provided a dissenting opinion on the "direct table service" issue, both called for the California Supreme Court to review this issue to provide further guidance.

I completed two seminars (one for California and the other nationwide) last week for BLR on conflict management in the workplace, and I thought it would be a good time share a few additional thoughts on the topic. I’ve encountered a lot of skepticism about this topic – especially from other lawyers – that it is a “touchy feely” topic. I am not claiming a manager can learn everything she needs to know about the topic in one seminar, but it is clearly a skill that supervisors and managers need to develop to be successful. If there was not conflict in the workplace, or if it was simple to deal with, managers would be out of a job. Thankfully for managers, this skill is not easily learned, and takes years of experience to develop. Here are a few tips to assist in the process.

Don’t avoid or ignore workplace conflicts.

Letting conflict fester will lead to litigation. If managers get involved in workplace conflicts early and often, it is more likely that the situation will be dealt with before a party thinks their rights have been violated and they need a lawyer.

Have a discussion with both workers involved in the conflict together.

Lay a few ground rules for the discussion:

  • Everyone will be heard (the supervisor will have to enforce this rule)
  • One speaker and one conversation at a time
  • Challenges are acceptable, must be respectful
  • Focus on issue (project, assignment, task at hand, etc.)
  • The workers can only use “I” statements NOT “YOU” statements (Example: “I received the information too late to include in my report.” Not: “You got it to me too late.”)
  • No personal attacks – criticism must be of acts, not the other person (Example: “That project is a waste of company time.” Not: “You are wasting my time.”)
  • Set clear guidelines on what is expected of the workers on a going forward basis (It is recommended to document these steps.)

Know when conflict crosses the line to create legal liability.

Managers should always be thinking about whether the conflict crosses the line from simple workplace disputes or personality conflicts into actionable harassment, discrimination or retaliation.

Provide reprimands the right way.

Managers should think through how to approach an employee when giving them a warning, either verbal or written. Here are a few suggestions:

  • The warnings should not be administered in front of other employees.
  • The manager should think through how the discussion will go, and possible responses to different reactions from the employee.
  • Set out the clear expectation of what the employee needs to do to correct the problem.
  • Document the warnings – even verbal warnings to employees. If the warning is a written warning, have the employee sign the warning.  If they refuse to sign it, record on the document that the employee refused to sign.

The issue in Moreno v. Hanford Sentinel, Inc., as stated by the court, is:

… whether an author who posts an article on myspace.com can state a cause of action for invasion of privacy and/or intentional infliction of emotional distress against a person who submits that article to a newspaper for republication.

The case arose out of a college student, Cynthia Moreno’s, return to her hometown of Coalinga, California (which is somewhere between Sacramento and Los Angeles). She wrote “An ode to Coalinga” and posted it on her site on MySpace.com. The ode badmouthed her hometown. Six days after publishing it on MySpace, she took the writing off of the site, but the town’s high school principal submitted the writing to the local newspaper for publication. The newspaper republished the ode in the letters to the editor section and listed Cynthia’s full name (she only used her first name on MySpace). 

This must have been some ode, as the town became furious:

The community reacted violently to the publication of the Ode. Appellants received death threats and a shot was fired at the family home, forcing the family to move out of Coalinga. Due to severe losses, David closed the 20-year-old family business.

Because the information was published on MySpace.com, there could not be a cause of action for invasion of privacy.

The court held that publishing the ode on MySpace.com defeated any theory that the newspaper’s republication of the ode was an invasion of privacy. The court explained:

Cynthia’s affirmative act made her article available to any person with a computer and thus opened it to the public eye. Under these circumstances, no reasonable person would have had an expectation of privacy regarding the published material. As pointed out by appellants, to be a private fact, the expectation of privacy need not be absolute. (Sanders v. American Broadcasting Companies (1999) 20 Cal.4th 907, 915.) Private is not equivalent to secret. (M.G. v. Time Warner, Inc. (2001) 89 Cal.App.4th 623, 632.) “[T]he claim of a right of privacy is not ‘“so much one of total secrecy as it is of the right to define one’s circle of intimacy — to choose who shall see beneath the quotidian mask.”’ Information disclosed to a few people may remain private.” (Ibid., fns. omitted.) Nevertheless, the fact that Cynthia expected a limited audience does not change the above analysis. By posting the article on myspace.com, Cynthia opened the article to the public at large. Her potential audience was vast.

The court also held that the fact Cynthia removed the Ode from her online journal in six days does not change its analysis. “The publication was not so obscure or transient that it was not accessed by others.” The court also held that because Cynthia published the ode under only her first name on MySpace, but then the newspaper republished it under her first and last name is irrelevant. The court said her identity was readily ascertainable from the MySpace page – primarily because she posted her picture on the site.

While not directly an employment law case, the holding definitely has ramifications for employees who post information on the Internet. As discussed previously here and here, employers can view and possibly act upon information employees list on the Internet. This holding provides further support that employees (as everyone) should be very careful in what they post on the Internet.
 

The DOL is offering a couple of webcasts to discuss employers’ and third parties’ obligations under the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA provides for COBRA premium reductions and additional election opportunities for continuation coverage. The webcasts are an effort to assist employers in complying with the new requirements.

The presentation available from the DOL’s site is about 2 hours long. I have not yet listened to the webcast, so I cannot recommend whether or not it is informative, but the price is right – free. Below are the PowerPoint slides used during the presentation:

COBRA Provisions Under Arra http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=dolcobraprovisionsunderarra-090406172133-phpapp02&stripped_title=cobra-provisions-under-arra

Anyone interested in listening to the webcast presented on March 24, 2009 can click here. The registration is fairly simple, but you will need RealPlayer on your computer (click here to download a free version).

Here are some other related links employers may find helpful:

Fact Sheet on Premium Reduction Under ARRA
http://www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html

Model Notices
http://www.dol.gov/ebsa/COBRAmodelnotice.html

Department of Labor (DOL) FAQs on Premium Reduction Under ARRA
http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html

Internal Revenue Service (IRS) FAQs on Premium Reduction Under ARRA
http://www.irs.gov/newsroom/article/0,,id=204708,00.html

Form 941
http://www.irs.gov/pub/irs-pdf/f941.pdf

Form 941 Instructions
http://www.irs.gov/pub/irs-pdf/i941.pdf

DOL COBRA Web page
www.dol.gov/COBRA

IRS COBRA Web page
http://www.irs.gov/newsroom/article/0,,id=204505,00.html
 

In addition to wrongful termination claims brought by terminated employees, employers also face an additional cause of action for slander.  In a recent appellate decision, The Nethercutt Collection v. Regalia, the Plaintiff was terminated from his employment at a classic car museum. Regalia asserted causes of action for wrongful termination in violation of public policy, tortious interference with contract and advantageous business relations and opportunities, and slander. Regalia’s tortuous interference claim was dismissed prior to trial, and the jury rejected his wrongful termination claim. The jury found that Regalia had suffered no noneconomic damages, but still awarded him $750,000 in damages for harm to his reputation for statements made by Defendants about Regalia after he was terminated. Defendants appealed the jury’s finding.

Slander

The trial court focused on two statements made by the employer in this case for Regalia’s slander claim. The first statement made by the employer was that Regalia demanded a finder’s fee for assisting the museum in acquiring a classic Talbot-Lago car worth $2.3 million, and that Regalia was not entitled to the fee. Second, the employer stated that other employees would not work for Regalia and would leave if he had remained employed.

Civil Code section 46 provides:

Slander is a false and unprivileged publication, orally uttered, and also communications by radio or any mechanical or other means which: 1. Charges any person with crime, or with having been indicted, convicted, or punished for crime; 2. Imputes in him the present existence of an infectious, contagious, or loathsome disease; 3. Tends directly to injure him in respect to his office, profession, trade or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profits; 4. Imputes to him impotence or a want of chastity; or 5. Which, by natural consequence, causes actual damage.

A slander that falls within the first four subdivisions of Civil Code section 46 is slander per se and require no proof of actual damages. A Slander that does not fit into those four subdivisions is slander per quod, and special damages are required for there to be any recovery for that slander.

The appellate court rejected Regalia’s argument that the two statements at issue in the case are slander per se:

A person can make a claim for money that is rejected as not being justified, and still not be viewed as having committed an act that reflects negatively on that person. Thus a statement about such a claim does not necessarily “directly injure him in his profession, trade or business” (Correia v. Santos, supra, 191 Cal.App.2d at p. 852) so as to fit within subdivision (3) of Civil Code section 46. (See Gang v. Hughes (9th Cir. 1954) 218 F.2d 432 [alleged statements that a plaintiff’s attorney refused to settle a case until he was paid and that he was paid because he demanded immediate payment not slander or libel per se].) Likewise, the statement that Regalia was fired because other employees would not work for him and would leave if he remained employed does not, on its face, clearly fall within subdivision (3) of Civil Code section 46. That one or more employees do not want to work for someone, without more, again, does not necessarily reflect adversely on the person. The employee or employees might not want to work for a person because of the person’s work ethic or rectitude, or legitimate business policies. Those statements may by “natural consequence” cause plaintiff actual damages. (Civ. Code, § 46, subd. (5).) But that makes them slander per quod and requires proof of actual damages.

Therefore, the appellate court overturned the trial court because the jury specifically found that Regalia did not suffer actual damages.

Even though the employer succeeded in this case, it presents a good reminder to employers to be careful in communications to others about the reasons why certain employees were terminated. The best approach is to not discuss the reasons for an employee’s termination with any employees in the organization unless they have a need to know.

The case can be viewed from the court’s website for a short period of time in PDF or Word. 
 

The newly appointed Secretary of Labor, Hilda Solis, issued a statement on March 24, 2009 that the Department of Labor is renewing its efforts to enforce labor laws across the country. With the addition of 250 field investigators provided to the DOL under the American Recovery and Reinvestment Act, businesses can be assured of increased audits.

As the Ohio’s Employer’s Blog points out, a DOL audit can feel like an unpleasant medical exam and employers need to be proactive about compliance. Except, I must add, one difference between the medical exam and DOL audit is that you can buy insurance to cover the costs of the medical exam.

In California, employers should review their pay practices, including that employees are paid on time and receive at least the minimum wage for California. For example, employers should insure they are complying with meal and rest break requirements, properly recording meal breaks and the employees’ time worked, properly paying overtime, and reimbursing employees for all business related expenses. Employers employing minors should also carefully examine the child-labor laws applicable to their business, as these requirements are extremely detailed and many well-intentioned employers may still be in violation.

Businesses should also audit whether they have properly classified their exempt employees and independent contractors. A misclassified employee can create a huge amount of liability for a business, as the misclassified employee is entitled to damages for overtime pay, penalties, interest, and their attorney’s fees.

Employers need to be proactive about complying with these complex wage and hour laws. If cost is a concern, complete an in-house audit and then have an attorney double check the policies and practices. It will cost a lot more to contact an attorney after the DOL is in your workplace or the lawsuit has already been filed.

The DOL recently published sample COBRA notices to help plans and individuals comply with the notice requirements set forth in the American Recovery and Reinvestment Act (ARRA) of 2009. 

The DOL explains:

 

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (ARRA) of 2009 (Pub. L. 111-5). ARRA includes a requirement that the Secretary of Labor (the Secretary), in consultation with the Secretaries of the Treasury and Health and Human Services, develop model notices. These models are for use by group health plans and other entities that, pursuant to ARRA, must provide notices of the availability of premium reductions and additional election periods for health care continuation coverage. This document announces the availability of the model health care continuation coverage notices required by ARRA.

 

The notices can be found at the Department of Labor’s website here.