In Audio Visual Services Group, Inc. v. Superior Court (Juan Solares), Los Angeles Superior Court Case No. B256266, Filed January 21, 2015, the Court of Appeal held that the Hotel Service Charge Reform Ordinance (“Ordinance”) does not apply to audio-visual workers working in the Century Corridor Property Business Improvement District (“Corridor”), surrounding LAX.
Historically, hotel workers in the Corridor area, who benefited from some of the highest occupancy rates in Los Angeles, were not paid a “living wage,” and for that reason relied on gratuities. Hotels in the Corridor instituted a practice of applying 15% to 20% service charges to the bill of large group events held at the hotels. However, hotel workers began to see a decrease in gratuities because hotel customers assumed the service charges were being paid to the workers. Instead, many of the hotels retained the entire service charge. In 2006, the Los Angeles City Council enacted the Ordinance to increase the compensation of service workers at hotels in the Corridor. The Ordinance requires Corridor hotels with 50 or more guest rooms, and no collective bargaining agreement, to pass along the entire service charge to hotel workers who actually performed the services. (Los Angeles Municipal Code (“LAMC”) § 184.00, et seq.).
Plaintiff, Juan Solares, filed a class action on behalf of audio-visual workers employed by PSAV Presentation Services (“PSAV” and alleged a violation of the Ordinance and an Unfair Competition Claim pursuant to Business & Professions Code § 17200, et seq. PSAV demurred to the complaint, arguing that the first claim for violation of the Ordinance was barred by the statue of limitations, and that Plaintiff’s second cause of action failed to state a claim because the Ordinance “was intended to protect the wages of ‘traditionally tipped hotel workers,'” which Solares and the class were not. Plaintiff conceded his first claim was time barred, but argued that the Ordinance “applies to all hotel workers who perform a service for which the hotel employer imposes a service charge….” The trial court agreed with Plaintiff holding that “hotels and hotel subcontractors who choose to ‘un-bundle’ their bills with line items described as ‘Service Charges'” within the Corridor are required to pay service charges to audio-visual workers.
On appeal, the Court utilized a traditional statutory-construction analysis and focused on a list of examples following the general definition of “hotel worker” provided in the Ordinance. The examples included hotel workers “who work banquets or catered meetings, deliver food and beverages, and carry baggage,” whose wages typically included gratuities. (LAMC § 184.02, subd. A.1-3). The Court explained that if the city counsel had intended the term “hotel worker” to be used in its broadest sense—to include workers such as plumbers or audio-visual workers such as Plaintiff—then the examples provided in the Ordinance would have no meaning. Statutory construction requires that “every part of the Ordinance has some effect and cannot be treated as meaningless or surplusage.”
Ultimately, the Court reversed, granting PSAV’s demurrer without leave to amend and holding that audio-visual workers do not fall within the class of employees protected by the Ordinance because they are not the type of employees who traditionally relied on gratuities as part of their wages. Employers in the Corridor especially, and elsewhere, will be benefited by taking the time to determine whether service charges related to specific services must be passed on to employees directly.
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