High Court to Review Disputed ‘Subminimum’ Wage

The state Supreme Court agreed Wednesday to review the legality of a controversial “subminimum” wage for California restaurant employees and other workers who receive tips.

The justices moved quickly to resolve the issue, ordering arguments in September over whether the state Industrial Welfare Commission properly set a $3.50-per-hour minimum for tipped employees while raising the wage floor to $4.25 for other workers.

A decision could come early this fall.

The commission allowed the two-tier minimum wage to go into effect July 1 pending the outcome of a court challenge to its legality by labor officials and other organizations.

At the same time, state officials recommended that employers set aside funds to cover the 75-cent-an-hour difference in the two standards. If the court overturns the two-tier system, employers may be required to pay back wages, accumulating at a statewide total of over $3 million a day, lawyers said.

The legal issue before the justices centers on the commission’s power to re-interpret a 1975 state statute barring employers from deducting tips from employees’ wages.

Previously, the commission, then made up of appointees of Gov. Edmund G. Brown Jr., had rejected employers’ proposals for a subminimum wage, saying it was prohibited under the law. The court, in a 1980 ruling, upheld the commission’s action.

But last December, the commission, with new members appointed by Gov. George Deukmejian, revised its interpretation of the 1975 law and voted 3 to 2 to implement a two-tiered minimum wage, setting a $3.50 minimum for workers who receive at least $60 a month in tips.

As many as 500,000 tipped employees were seen as likely to be affected by the new wage-floor system.

In June, a state Court of Appeal in Sacramento struck down the subminimum wage, saying the commission lacked authority to reject a prior interpretation of the law that had been approved by the courts.

The commission, appealing the decision to the state Supreme Court, said it was not allowing employers to deduct tips from wages but merely establishing a separate wage category for a particular group of workers.

Donald J. Querio, a San Francisco attorney representing the commission, welcomed the justices’ action Wednesday, expressing hope that the high court ultimately will give the commission broad authority to interpret the law.

“Our view is that the court’s 1980 ruling simply said that the commission’s prior interpretation was a permissible one but not the only one that could be given to the statute,” Querio said.

Alan S. Levins of San Francisco, a lawyer for the California Restaurant Assn. and the California Hotel and Motel Assn., which joined the commission in its appeal, also voiced hope that the court would affirm the commission’s authority.

“With all due respect, we believe that no court should get involved in second-guessing a commission decision as long as it is not an arbitrary one,” Levins said.

John M. True of the Employment Law Center, an attorney for a group of employees joining inthe challenge to the subminimum wage, said he was disappointed that the justices had not simply allowed the Court of Appeal ruling to stand.

True added, however, that there was still “great reason to believe” that the high court would require the commission to stand by its previous interpretation of the law and abandon a subminimum wage.

“With the winds of political change, the commission, a political body made up of political appointees, has come up with a new and unacceptable interpretation of the law,” he said.

The court’s order granting review was signed by Chief Justice Malcolm M. Lucas and Justices Stanley Mosk, Edward A. Panelli, John A. Arguelles, David N. Eagleson and Marcus M. Kaufman.