Employees’ Tip Ball Fails To Save Game; Series Continues
This blog and Baker Hostetler’s HospitalityLawg often come across the same cases, particularly because the hospitality industry is increasingly the target of employment class actions. The entry below was largely prepared by our hospitality industry team, who we thank for their efforts.
We along with our sister blog reported a few weeks ago that a hotelier was found liable by a Hawaii federal court for not distributing 100% of “service charges” to wait staff as tips. That result was predicated on reading the following two laws in tandem:
- Hawaiian Revised Statutes § 481B-14, which requires service charges applied by hotels or restaurants to be distributed as “tip income” unless it is clearly disclosed that the service charge will be used to pay something other than wages or tips of employees.
- Hawaii Revised Statutes § 388-6 concerning “Withholding of Wages.” This statute prohibits employers from deducting, retaining or otherwise causing not to be paid “wages” to an employee.
In the earlier case, the defendant hotelier was unsuccessful in arguing that that the above statutes were ambiguous. But if you watched the World Series, you know that different umpires have different strike zones. So if we extend Chief Justice Robert’s famous metaphor, we shouldn’t be surprised that a different court had a different call.
In Villon, District Court Judge Leslie Kobayashi undertook a detailed review of both statutes and concluded that the plaintiffs may have chased a bad pitch. Here’s a short play-by-play:
- Judge Kobayashi first noted that § 481B-14 used the phrase “tip income,” while § 388-6 referred to “tips.” From this she noted that the Hawaii Legislature had elected to use different terminology, but that it wasn’t “readily apparent” what the distinction was.
- This ambiguity allowed Judge Kobayashi to delve into the legislative history, which proved to be illuminating. Turns out §481B-14 was originally proposed as an amendment to the Hawaii wage and hour laws, including § 388-6. But, based on concerns raised by the International Longshore and Warehouse Union and the Hawaii Department of Labor and Industrial Relations, the bill was converted to a new section in the consumer protection law with the purpose of enhancing “consumer protection with respect to service charges imposed by hotels and restaurants on the sale of food and beverages.”
- From this, Judge Kobayashi determined that the laws were not of the same subject matter, and thus could not be construed with reference to each other.
Judge Kobayashi then cleared the bases as far as those fans of the dispassionate umpire approach are concerned:
This Court is sympathetic to Plaintiffs’ position. There is an unjust and gaping hole in the statute: if Defendant ultimately prevails on Plaintiffs’ Chapter 480 claim and Plaintiffs’ cannot enforce the alleged § 481B-14 violation through any other means, arguably no one will enforce the violation. . . . Unfortunately, it is not this Court’s place to sit as the Legislature does and try to create a new enforcement mechanism to replace or supplement an old one, no matter how inadequate and unfair the original statutory scheme may be.
In the end, Judge Kobayashi elected to defer to a closer, the Hawaii Supreme Court, as to the question of whether food and beverage employees can enforce alleged violations of § 481B-14 through Hawaii’s wage and hour laws. We can bet that the plaintiffs’ bar will be looking to pitch its way out of a jam when it comes to the precise language of the questions to be certified.
The Bottom Line: Tipping policies are becoming a target for class action wage and hour litigation. There is split of authority in Hawaii regarding the scope of relief, and the treatment of “service” fees that will be of great significance to hospitality employers.