Wage Disputes, Tip Pooling Agreements, and Union Issues
The Goldstein Law Firm
March 2009 Newsletter
“Wage Disputes, Tip Pooling Agreements, and Union Issues”
By: Charles H. Goldstein, Esq.
The Goldstein Law Firm
1. WAGE DISPUTES AND GENERAL RELEASES
Releases are not a “do it yourself” project. Releases must be tailored to the specific facts of each case. Mistakenly, some employers have employees sign releases of all claims as a condition of receiving their final paycheck. These releases would violate California Labor Code Section 206.5 and would be unenforceable. However, properly drafted releases can protect employers from costly lawsuits.
California Labor Code Section 206.5 states: “An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee.”
In Chindarah et al. v. Pick Up Stix, Inc. et al. (Cal. App. 4th Dist.) 2009 DJDAR 2927, the California Court of Appeals was faced with a lawsuit brought by former employees against Pick Up Stix alleging claims for unpaid overtime, penalties and interest due to the misclassification of their jobs as exempt from overtime pay. During the course of the litigation, Pick Up Stix secured settlement agreements with some of their former employees containing a general release acknowledging that he or she had spent more than 50% of the time performing managerial duties, releasing Pick Up Stix from all claims for unpaid overtime and any other Labor Code violations during the relevant time period, and agreeing not to participate in any class action that may include any of the released claims.
The Court found that this general release did not cover “wages due or to become due, or made as an advance on wages to be earned” since the settlement agreement involved a bona fide dispute over wages already earned. The releases settled a dispute over whether Pick Up Stix had violated wage and hour laws in the past and did not attempt to “exonerate” the company from future violations, which would violate Section 206.5. Lastly, the Court held that the releases did not violate Section 206.5 because the release did not condition payment of wages on execution of the release.
2. RESTAURANT TIP POOLING AGREEMENTS
As many of our firm’s restaurant clients know, California Labor Code Section 351 states in pertinent part: “No employer or agent shall collect, take, or receive any gratuity or a party thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as part of the wages due the employee from the employer.”
One of the important issues in cases challenging tip pooling arrangements is who should participate in tip pooling agreements beyond the immediate server.
The California Court of Appeals recently decided a case interpreting Section 351. Lu v. Hawaiian Gardens Casino, Inc. (Cal. App. 2nd Dist.) B194209 (2009) involved several issues, the most important of which was whether customer service representatives in a Casino could be classified as “agents” under California Labor Code Section 350, and therefore should not be included in the Casino’s tip pooling agreement. The Court found that a triable factual issue existed as to whether a customer service representative was an “agent” because customer service representatives: (a) respond to Casino patron’s complaints about Casino dealers; (b) criticize, direct, advise, and counsel Casino dealers on their conduct at work; (c) have the power to direct Casino dealers to “be more careful”; (d) can allow an employee to leave early; and (e) can be in charge of a section during a shift.
Therefore, in order to avoid defending a tip pooling agreement in Court, employers cannot allow employees who have any hiring/termination authority and/or employees who have the authority to supervise/direct/or control the acts of other employees, to be included in their tip pooling agreements. Managers and assistant managers who may provide service still must be excluded from tip pooling agreements if they can be construed to be “agents” of the restaurant and/or other establishment, such as the Casino in the Lu case.
3. UNION ISSUES
A. Unilateral Changes
Unilateral changes such as changing working hours for the most productive use of your employees and equipment; changing the order of layoffs and recall from lay off to retain and recall the most productive employees, who may not be the most senior employees; creating intermittent work schedules; and changing/reducing wages and/or benefits must be bargained for with the Union before these actions are taken, unless your collective bargaining agreement contains a strong management rights clause that strictly limits bargaining to so-called “effects bargaining.”
In today’s challenging times, the rules of the game have changed and employers must have the flexibility to act quickly. However well-intentioned outmoded, union contract work rules must be changed to reflect the realities of the current economic crisis. Even when changes in operations must be made to save the business and keep it operating, an Employer violates Section 8(a)(1) and (5) of the National Labor Relations Act if it makes a unilateral change in wages, hours, or other terms and conditions of employment without first giving the Union notice and an opportunity to bargain. In Cardi Corporation and Carpenters Local No. 94, New England Regional Council of Carpenters a/w United Brotherhood of Carpenters and Jointers of America 353 NLRB No. 097 (NLRB 2009) the employer sought to change job requirements and job qualifications and found itself in violation of the NLRA.
B. Tips for Union Employers
1. If you are planning to make a drastic change in your operation, meet with the Union to explain the change before it is announced.
2. Many Union agents will work with you to make mid-contract changes if they believe that the alternative for their members will be the loss of jobs.
3. Clearly describe the changes that you need to make, why you need to make the changes, and what the consequences will be if changes are not agreed to at the time that you are proposing the changes and/or in the near future.
4. If the contract is about to expire, request that the Union begin negotiations early so that the changes you are requesting become a part of the regular negotiations.
5. Always maintain credibility with your employees and with the Union. Never ask for mid-term contract changes unless they are vital to the survival of the business.
C. The Employee Free Choice Act Could Soon Become Law
Hilda L. Solis, a Congresswomen formerly representing California’s 32nd Congressional District, has now been confirmed as the new United States Secretary of Labor. As a Congresswoman, Solis was a major supporter of the Employee Free Choice Act (“EFCA”), which could soon be brought to the House and Senate floor for a vote.
If passed and signed into law, the EFCA would most significantly amend the law by forbidding the National Labor Relations Board from holding a secret-ballot election where more than 50% of employees in a unit sign union authorization cards. The EFCA bill states that if a majority of workers sign union recognition cards, the NLRB “shall not direct an election” but shall certify the union as the exclusive bargaining representative for the appropriate unit of employees.
In my experience, authorization cards are signed under the most coercive circumstances, where undue pressure is common. Union organizers, who solicit authorization cards, will promise employees anything to get them to sign an authorization card. In 44 years of practicing law, the most egregious promise occurred in a case where employees told the employer that the organizer told them that if they signed authorization cards and voted for the Union, the Union would make certain that the employer paid for them to buy a home. By law, such promises are not unlawful because the NLRB takes the position that unlike an employer’s promises that the employer can carry out; the promises that a Union makes cannot be guaranteed. However, in my experience, employees do not make this distinction, unless the employer brings it to their attention through a successful campaign against the Union.
The Goldstein Law Firm
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