Court of Appeal Upholds Los Angeles Hotel Service Charge Ordinance

In Garcia v. Four Points Sheraton LAX (September 8, 2010) --- Cal.Rptr.3d ---, 2010 WL 3491954, hotel banquet captains and servers sued their employers under the Los Angeles Hotel Service Charge Reform Ordinance and the Unfair Competition Law (UCL). The trial court (LASC, Highberger) sustained the defendant employers' demurrers without leave to amend. The Court of Appeal reversed. It held:

In this appeal, we address the validity of the Hotel Service Charge Reform Ordinance (Ordinance) enacted by the City of Los Angeles (the City), requiring 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. The Ordinance 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. 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.

Appellants are service workers who challenge the trial court’s dismissal of their lawsuits to enforce the Ordinance on the grounds that it is preempted by Labor Code sections 350 through 356, which govern the disposition of gratuities. Appellants contend the Ordinance does not conflict with the Labor Code because it neither contradicts the Labor Code nor enters the field of regulating gratuities. Although not addressed by the trial court, appellants also contend the Ordinance does not violate the equal protection clauses of the federal and state Constitutions, is not void for vagueness under the due process clause, and is not an unconstitutional taking.

We conclude 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. We further conclude there is no equal protection violation under the deferential, rational basis standard, and the Ordinance is not otherwise Constitutionally infirm. Therefore, we reverse the judgments of dismissal entered following the trial court’s order sustaining the demurrers to the complaints without leave to amend.

Slip op. at 1. The full text of the opinion is available here.