The California Supreme Court issued two long awaited decisions, in Reid v. Google (08/05/2010 Cal.S. Ct., No. S158965) and Lu v. Hawaiian Gardens Casino (08/09/2010 Cal.S.Ct., No. S171442), with mixed results for employers. In Reid, an age discrimination case, the Court limited the use of the "stray remarks" doctrine. Lu, a wage and hour class action, involved a claim against the employer for violation of Labor Code section 351 alleging conversion of tips by the employer's mandatory tip pooling policy. There, the California Supreme Court held in favor of the employer, finding section 351 did not give employees a private right of action. Both decisions highlight the importance of on-going training and updates to employment policies and procedures.

On August 5, 2010 the California Supreme Court filed its decision in Reid, deciding two separate issues: 1) whether evidentiary objections on which the trial court has not expressly ruled at summary judgment are waived on appeal, and 2) whether California law should adopt the stray remarks doctrine. Reid involved an age discrimination claim, where the trial court granted summary judgment for Google, finding the company had legitimate nondiscriminatory reasons for terminating plaintiff's employment. The Court of Appeal reversed the trial court's decision and found a prima facie case of age discrimination.

On the first issue of the evidentiary objections, the California Supreme Court held that a party's objections to evidence lodged in the trial court are preserved on appeal -- even if the trial court does not rule on those objections when deciding summary judgment.

On the second issue the Court considered the applicability of the "stray remarks" in California. Google argued that isolated statements made by Reid's co-workers were irrelevant because "they were made by non-decision-makers, were ambiguous, and were unrelated to the adverse employment decision." These statements included comments by co-workers (non-decision makers) that Reid was "slow," "fuzzy," "sluggish," "lethargic," did not "display a sense of urgency," and "lack[ed] energy" and his ideas were "obsolete" and "too old to matter," among others. The California Supreme Court upheld the decision of the Court of Appeal, finding that the "stray remarks" could be considered along with the other evidence in the record.

However, the Court explained that a stray remark alone cannot create actionable discrimination and must be considered in light of the totality of evidence in the record. The Court explained:

A stray remark alone may not create a triable issue of age discrimination (See e.g., Merrick v. Farmers Ins. Group(9th Cir. 1990) 892 F.2d 1434, 1438-1439 [employer's statement that replacement employee had been hired because he was a "'bright, intelligent, knowledgeable young man'" was insufficient to defeat summary judgment].) But when combined with other evidence of pretext, an otherwise stray remark may create an "ensemble [that] is sufficient to defeat summary judgment." (Shager, supra, 913 F.2d at p.403, italic added.)

Thus, while the decision limits the use of stray remarks, permitting consideration of such evidence along with other evidence – it confirms that reliance on stray remarks alone cannot create actionable discrimination.

This week, on August 9, 2010, in a case with potentially wide applicability to employers in the service industry that "pool" tips received by their employees, the California Supreme Court issued its opinion in Lu v. Hawaiian Gardens Casino, Inc. Lu, in a class action, sued his employer for violation of California Labor Code section 351 claiming its policy of requiring casino dealers to segregate a portion of their tips and pay them into a community tipping pool to be distributed to various other service workers, including the people who brought him his chips, hosts, floor people and concierges, violated the statute.

Unfortunately for Lu, the California Supreme Court concluded that section 351 of the California Labor Code did not contain a private right of action to sue as a means of enforcement of that Labor Code section. The Court explained that section 351 does not contain an enabling provision, or language susceptible of legislative intent to afford employees a private right to sue. Instead, the penalties for violating that particular statutory provision are built in--section 351 provides that an employer who violates that provision is guilty of a misdemeanor, and can be fined or even imprisoned. Additionally, the Court noted that Section 351's acknowledgement that employees have a property right to tip income provided other avenues on which to adjudicate a violation of that right, such as a claim for common law conversion (the civil law equivalent of theft).

Therefore, while an employee may not have a private right of action to sue expressly under Labor Code section 351, in addition to the risk of fines and imprisonment, employers remain at risk for civil lawsuits for conversion to recover the forfeited portion of tips redistributed via the tipping pool.

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