Court Asked to Rule Out Low Wage for Tip Earners
The state Supreme Court, reviewing a hard-fought legal battle between labor groups and employers, was asked Wednesday to strike down a subminimum wage for restaurant workers and other employees who receive tips.
Lawyers for the state AFL-CIO and several individual workers told the justices that the two-tier wage system implemented in July conflicts with a state law intended to bar lesser pay for tipped employees.
“The Legislature meant to prohibit consideration of tips as wages,” said Mark Greenberg of the Western Center on Law and Poverty in Los Angeles, an attorney for the employees. “This penalizes workers for getting tips.”
$60 a Month
The state Industrial Welfare Commission, after two years of debate, last December raised the minimum hourly wage from $3.35 to $4.25 for most workers but set a $3.50 hourly minimum for those receiving at least $60 a month in tips.
Lawyers for the commission and restaurant and hotel groups defended the panel’s authority to set the subminimum wage as a way to offset business closures and job losses that would likely occur if tipped workers received the higher wage.
“The commission may consider the entire economic situation of the worker and the industry in which he is employed,” said Jan T. Chilton of San Francisco, representing the commission. “There is nothing in the law to prevent it from considering tips.”
Alan S. Levins of San Francisco, representing the California Restaurant Assn. and the California Hotel and Motel Assn., said that paying tipped workers the full minimum wage would have a “disastrous effect.”
The higher wage would result in layoffs and terminations as employers either went out of business or converted to self-service operations, Levins said.
According to a recent restaurant association survey, about two-thirds of the employees in full-service restaurants receive the minimum wage. More than 90% of those workers receive tips and are earning an average of $8.43 an hour, it says.
An estimated 525,000 restaurant workers, deliverymen, maids, car washers and other employees who receive tips could be affected by the high court’s ruling, which is expected later this year.
State Law Violated
A state court of appeal in Sacramento ruled last June that the two-tier system violated a 1975 state law declaring that tips belong exclusively to workers and prohibiting employers from deducting tips from wages.
In reaching its decision, the appellate court relied on a 1980 ruling by the state Supreme Court that upheld the commission’s prior interpretation of the 1975 law as prohibiting a lower wage for tipped employees.
At that time, the Industrial Welfare Commission was led by appointees of Democratic Gov. Edmund G. Brown Jr. But last December, after appointees of Republican Gov. George Deukmejian gained control, the commission reversed its position, concluding that a two-tier system was permissible under the law.
New System in Effect
The commission has since allowed the new system to go into effect, pending a high court ruling. But the commission has recommended that employers set aside funds to cover the 75-cents-an-hour difference in the two standards so they can provide back pay if the subminimum wage is invalidated.
In Wednesday’s hourlong hearing, Justices Allen E. Broussard and Stanley Mosk--the only two court members not appointed by Deukmejian--peppered attorneys with questions reflecting considerable skepticism about the legality of the two-tier wage system.
Broussard contended that the issue was settled by the 1980 court decision, which he said barred the commission from reversing its previous position against a two-tier system.
“Once the court adopts that interpretation, the ballgame’s over,” Broussard said.
‘Reasonable’ Interpretation
When Chilton argued that the 1980 decision still allowed the commission to adopt any “reasonable” interpretation of the law it wished, Broussard declared, “I have never heard counsel denigrate a court decision to the extent you have.”
Mosk pressed the attorneys on the fact that under the two-tier system, a worker who received the minimal $60 in tips a month could end up losing far more in pay as the result of being covered only by the subminimum wage.
Court approval of the two-tier system would mean “putting our stamp on an inequitable wage scheme,” Mosk said.
Charles P. Scully II of San Francisco, an attorney representing John F. Henning, secretary-treasurer of the state AFL-CIO, acknowledged that the Legislature had authorized exceptions in minimum-wage requirements for such occupations as camp counselor. But there was no legislative authorization of a different minimum wage for tipped workers, he said, and the commission thus lacked authority to impose such a standard.
