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Key Issues In Nevada Law: A History Of Tip Pooling In Nevada

Posted by: on Wed, Sep 19, 2012

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By G. Mark Albright, Esq.

NRS 608.160 provides as follows:

1. Is unlawful for any person to:

(a) Take all or part of any tips or gratuities bestowed upon the employees of that person.

(b) Apply as a credit toward the payment of the statutory minimum hourly wage established by any law of this state any tips or gratuities bestowed upon his employees.

2. Nothing contained in this section herein shall be construed to prevent such employees from entering into an agreement to divide such tips or gratuities among themselves.

In Alford v. Harold’s Club, 669 P.2d 721 (Nev. 1983), the Nevada Supreme Court had to determine whether or not NRS 608.160 precluded the Harold’s Club from imposing a tip pooling policy as a condition of employment at its casino. The court noted that NRS 608.160 prohibits an employer from taking all or any part of any tips or gratuities bestowed on his employee. The statute provides, however, that it shall not be construed to prevent employees from agreeing to divide tips among themselves. The issue on appeal was whether the statute prohibits the employer from unilaterally imposing a tip pooling agreement on employees as a condition of their employment, even though the employer does not retain any part of the tips for his own use or reap any direct benefit from the pooling. This was the first time the issue had come to the Nevada Supreme Court.

The court noted that in 1977 the Federal District Court in Nevada had addressed a similar issue regarding tip pooling policies. In Moen v. Las Vegas International Hotel, 402 F.Supp. 157 (D. Nev. 1975), affirmed 554 F.2d 1069 (1977), the court addressed an employee challenge to a tip pooling policy under the same statute and determined that the purpose and proper interpretation of the statute is that it was enacted to prevent the taking of tips by an employer for the benefit of the employee. Therefore, the Federal District Court in Moen concluded that the statute did not bar the employer from imposing a tip pooling agreement among employees as a condition of employment.

The Nevada Supreme Court in Alford noted that although it was not bound by the Federal District Court’s interpretation of a Nevada statute, the Nevada Supreme Court nevertheless believed that the interpretation advanced in the Moen decision, in light of the legislative history and well established and commonly known Nevada employment practices in casinos, was the correct one.

The issue was next addressed by the Ninth Circuit in the case of Cotter v. Desert Palace Inc. dba Caesars Palace, 880 F.2d 1142 (9th Cir. 1989). In Cotter, the plaintiffs were professional dice dealers at Caesars Palace in Las Vegas. The dealers worked in crews of four, with each crew assigned to take one dice per table per shift and were paid hourly wages by the casino and received customer tips or tokes.

Prior to March 1, 1988, it had been a longstanding practice at Caesars Palace Casino to distribute the tips on a crew for crew basis. At the end of each shift, the four dealers assigned to a given table would pool all their tips and divide them equally among themselves. On March 1, 1988, IRS agents entered Caesars Palace and executed levies upon two dice dealers. That same afternoon, Caesars Palace issued an inter-departmental memorandum changing its tip distribution policy. Under the new policy, dealers from all shifts were required to group all tips for a 24 hour period and then the tips would be divided evenly, without regard to the contributions of any particular crew. In order to implement the new policy, Caesars directed the formation of a toke committee.

On March, 20, the dealers elected four representatives to sit on the toke committee. The dealers also voted to share tokes with second vacationing dealers and to establish a medical assistance plan for dealers with long-term illnesses. On April 11, the committee informed the management that it had decided on a policy of sharing tips with boxmen, supervisory workers who occasionally fill in for the dealers. Caesars rejected the proposal. On June 22, the casino also rejected a proposal on which each dealer would receive a share of tokes proportional to his crews’ contribution during the 24 hour pool. The dice dealers at Caesars Palace filed suit in state court alleging a breach of contract, deprivation of civil rights and the creation of a mandatory labor organization in violation of Nevada’s right to work laws.

The district court denied the plaintiffs’ motion for a preliminary injunction and granted the defendant casino’s motion to dismiss the claims based on Nevada’s right to work laws. On appeal, the Ninth Circuit held that Nevada recognizes the common law doctrine of employment at will. That doctrine provides that an employment for an indefinite term may be terminated at any time for any reason or for no reason at all, by either the employee or the employer without any legal liability. An employer privileged to terminate an employee at any time necessarily enjoys the lesser privilege of imposing prospective changes on the condition of future employment. Therefore, the court held that Caesars Palace was justified in changing the procedures by which its employees receive tips and held that the new procedure (forcing 24 hour pooling) does not violate Nevada law.

The Ninth Circuit went on to explain that Nevada law recognizes the authority of an employer to require its employees to pool tips as a condition of employment. Alford v. Harold’s Club, 669 P.2d 721 (Nev. 1983) and Moen v. Las Vegas International Hotel, 402 F.Supp 157(D. Nev. 1975) affirmed 554 F.2d 1069 (1997). The Ninth Circuit pointed out that in Alford, nine employees who were fired after refusing to participate in crew to crew sharing, brought a suit for wrongful termination. The Nevada Supreme Court in that case held as follows:

“Given that Harold’s Club had the right to insist on its employees’ participation in a tip pooling arrangement, it is difficult to see how appellants could have been wrongfully terminated when they refused to comply with such a legitimate employment policy.” See Alford, 669 P.2d at 724.

The Ninth Circuit then went on to hold that forced tip sharing does not violate Nevada law or policy so long as the employer does not “retain any part of the tips for his own use or reap any direct benefit from the pooling.” Citing NRS 608.160. Therefore the court held that Caesars Palace Casino was privileged to impose forced tip sharing prospectively as a condition of future continued at-will employment.

The Supreme Court of Nevada again addressed tip pooling in October of 2008 in the Baldonado v. Wynn, Inc. decision, 194 P.3d 96 (Nev. 2008). In the Wynn case, the table game dealers brought an action alleging that the casino’s modified employment policy, requiring the dealers to share customer tips with persons at certain lower level management positions, violated state labor laws. The new policy decreased the total tips previously enjoyed solely by the dealers by approximately 10 to 15%. The trial clerk ruled against the dealers and in favor of the casino and the dealers appealed to the Nevada Supreme Court.

On appeal, the Nevada Supreme Court determined that no private cause of action existed by which the appellants, the dealers, could pursue their claims for statutory violations and concluded that appellants’ at-will employee status precluded any challenge to the employment policy and breach of contract grounds. The Nevada Supreme Court explained that the responsibility of the enforcing Nevada’s labor laws generally is first with the Nevada Labor Commissioner. Accordingly, the court implied no private right of action or cause of action to enforce NRS 608.160, but required that the dealers first exhaust their administrative remedies with the Nevada Labor Commissioner before filing suit.

On October 14, 2008, the dealers filed their complaint with the office of the Nevada Labor Commissioner to exhaust their administrative remedies. On July 11, 2010, the Labor Commissioner issued his opinion and order reviewing the Moen decision, the Alford decision, the Baldonado decision and even referenced the famous Starbuck decision from California, 94 Cal. Rptr 3rd 593 (2009). The Labor Commissioner summarized his order by stating that “based upon substantial evidence in the record, the plain language of the statute, and prior case law, the Wynn may unilaterally establish a tip pooling agreement that is a term and condition of an underlying at-will employment agreement.”

The Commissioner explained his rationale as follows: “People tip in a variety of ways and for a variety of reasons. Some tip because they had a wonderful experience with a particular employee and want to reward that employee. Some tip because they had a good time due to the collective effort of many employees. Some tip out a sense of obligation and would leave a tip regardless of how enjoyable the experience. Some tip just because they won and want to share the wealth. Some don’t tip at all. There are literally millions of customers playing table games in Las Vegas every year and to presume that there sole motivation for tipping was due only to the services provided by the dealer is not a reasonable conclusion.”

The Commissioner then noted the important employer exclusion as follows: “Only employers are directly excluded from sharing in the tips. A plain reading of the statute does not appear to place any limitations as to who may or may not be considered an employee for the purposes of tip pooling….Had Nevada’s legislature been inclined to include an exemption that would limit the tip pools’ participants in the statute, it could elect to do so in the future. In the meantime, they have not done so and the Labor Commissioner cannot usurp the legislative prerogative by creating exemptions where none have been provided for in this statute.”

Statutes

The dealers in Wynn alleged violations of three statutes, NRS 608.160, 608.100, and 613.120.

Nevada Revised Statutes 608.100 states:

1. It is unlawful for any employer to:

(a) Pay a lower wage, salary or compensation to an employee than the amount agreed upon through a collective bargaining agreement, if any;

(b) Pay a lower wage, salary or compensation to an employee that the amount that the employer is required to pay to the employee by virtue of any statute or regulation or by contract between the employer and the employee; or

(c) Pay a lower wage, salary or compensation to an employee than the amount earned by the employee when the work was performed.

2. It is unlawful for any employer who has the legal authority to decrease the wage, salary or compensation of an employee to implement such a decrease unless:

(a) Not less than 7 days before the employee performs any work at the decreased wage, salary or compensation, the employer provides the employee with written notice of the decrease; or

(b) The employer complies with the requirements relating to the decrease that are imposed on the employer pursuant to the provisions of any collective bargaining agreement or any contract between the employer and the employer.

Nevada Revised Statutes 613.120 states:

1. It shall be unlawful for any manager, superintendent, officer, agent, servant, foreman, shift boss or other employee of any person or corporation, charged or entrusted with the employment of any workmen or laborers, or with the continuance of workmen or laborers in employment, to demand or receive, either directly or indirectly, from any workman or laborer, employed through his agency or worked or continued in employment under his direction or control, any fee, commission or gratuity of any kind or nature as the price or condition of the employment of any such workman or laborer, or as the price or condition of his continuance in such employment.

2. Any such manager, superintendent, officer, agent, servant, foreman, shift boss or other employee of any person or corporation, charged or entrusted with the employment of laborers or workmen for his principal, or under whose direction or control such workmen and laborers are engaged in work and labor for such principal, who shall demand or receive, either directly or indirectly, any fee, commission or gratuity of any kind or nature from any workman or laborer employed by him or through his agency or worked under his direction and control, either as the price and condition of the employment of such workman or laborer or as the price and condition of the continuance of such workman or laborer in such employment, shall be guilty of a misdemeanor.

In November, 2011, Clark County District Court Judge Kenneth Cory entered an Order that Michael Tanchek, Nevada’s former Labor Commissioner, had erred in July, 2010 when he determined that Wynn resorts’ new tip pooling policy was legal. Judge Cory held that under Nevada law, employers cannot force their employees to share their tips with supervisors or other employees in different jobs, as Wynn had done. Judge Cory ordered the case back to the Labor Commissioner’s office for further review. An appeal to the Nevada Supreme Court is expected as this on-going battle continues.

About the Authors: G. Mark Albright is a Partner with the law firm of Albright, Stoddard, Warnick & Albright, an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on litigation in Nevada’s state and federal courts.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.