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Second District Holds That Hotel Service Charge Reform Ordinance Is Not Preempted by Labor Code’s Tip Provisions

In Preemption, Tips on September 9, 2010 at 7:09 am
Cute toiletries at Four Points by Sheraton
Image by drcw via Flickr

Yesterday, the Second District issued an opinion addressing the validity of the Hotel Service Charge Reform Ordinance (Ordinance) enacted by the City of Los Angeles, which requires non-unionized hotels in the Century Corridor near Los Angeles International Airport (LAX) to pass along mandatory service charges to workers who render the services for which the charges have been collected.  Garcia v. Four Points Sheraton LAX, et al., Nos. B210720, B210716, B210719, B210726, B210730, — Cal. Rptr. 3d —-, 2010 WL 3491954 (Cal. Ct. App. 2d Dist. Sept. 8, 2010). The Ordinance, which is codified in sections 184.00 through 184.06 of the Los Angeles Municipal Code, is based upon the City’s determination that LAX-area hotels reap economic benefits from their location and have the responsibility and ability to pay these workers a decent compensation.  Id. *1. “Service workers have seen their income decline as a result of the hotels’ practice of imposing mandatory service charges because patrons assume these charges are paid to the workers and therefore do not leave them a gratuity.” Id.

The trial court dismissed the service workers’ complaints, holding that the Ordinance by preempted by Labor Code sections including sections 351 (which governs the disposition of gratuities) and 350 (defining gratuity). Id. *2. Appellants service workers appealed, arguing that the Ordinance does not conflict with the Labor Code because it neither contradicts the Labor Code nor enters the field of regulating gratuities. Id. *1.

The court reversed the dismissals, holding that the Labor Code does not preempt the Ordinance because the “Labor Code provisions regulating gratuities are not irreconcilable with the Ordinance, and the Legislature has not demonstrated its intent to regulate in the field of service charges.” Id.

Judges and Attorneys

Justice Richard D. Aldrich wrote the opinion for the court.  Presiding Justice Joan D. Klein and Justice H. Walter Croskey concurred.

Appeal from judgments of Hon. William F. Highberger of the Superior Court of Los Angeles County.

Hadsell Stormer Keeny Richardson & Renick, Randy Renick and Cornelia Dai; Davis, Cowell & Bowe, Elizabeth Ann Lawrence, Sarah Varela and Winifred Kao, for Plaintiffs and Appellants.

O’Melveny & Myers, Scott H. Dunham, Apalla U. Chopra and Benjamin J. Kim for Renaissance Montura Hotel Los Angeles, Marriott International, Inc., Marriott LAX, Marriott Hotels and Resorts, Diamond Rock Hospitality and Sunstone Hotel Investors, Inc., Defendants and Respondents.

Littler Mendelson and Robert S. Blumberg for Pacifica Host Hotels, Inc., Defendant and Respondent.

Carmen A. Trutanich, City Attorney, Claudia McGee Henry, Senior Assistant City Attorney, and Gerald M. Sato, Deputy City Attorney, as Amicus Curiae for City of Los Angeles.

By CHARLES JUNG

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