Official: Casinos can split dealers’ tips with supervisors

By Liz Benston

Published Monday, July 12, 2010 | 3:06 p.m.

Updated Monday, July 12, 2010 | 7:02 p.m.

Steve Wynn’s controversial policy of splitting casino dealers’ tips with their immediate supervisors doesn’t violate state law, according to a ruling issued today by Nevada Labor Commissioner Michael Tanchek.

Dealers say the high-profile case, which marks the first major ruling of its kind on the subject of tip-pooling, may have wide-ranging implications for other tip-earners in Nevada by opening the door to efforts by employers to pool line workers’ tips with supervisors.

For example, Harrah’s Entertainment executives recently sent a notice to dealers at the company’s Caesars Palace resort stating that the company reserves the right to be able to split dealer tips with supervisors. At the time, Harrah’s executives said they had no immediate plans to follow Wynn’s lead.

Monday's 18-page decision, which comes after months of deliberation and weeks of public hearings last year, delivers a significant blow to dealers at Wynn Las Vegas who have been fighting the tip policy for the past four years. The ruling also applies to dealers at Encore, who are bound by the same tip policy.

The battle isn’t over yet, though. Dealers expect to appeal the Labor Commissioner’s ruling to Nevada District Court on up to the Nevada Supreme Court. The state court system would then determine whether Tanchek’s reasoning was correct.

“We know this will be a long battle. It’s only Round One of Round Three,” said Meghan Smith, the former Wynn Las Vegas dealer who brought the original complaint to the Labor Commissioner in 2007. “We certainly want to win at every round but it’s the final round, the Supreme Court, that’s going to be the one that counts.”

Las Vegas attorney Gregory Kamer, who represented Wynn in the dispute, said the ruling was thorough and will be difficult to win on appeal.

“The Labor Commissioner, after a lot of thought, addressed all the points raised by the dealers and concluded there was no merit to the case,” he said.

Tanchek’s decision isn’t surprising in that it relies heavily on previous court rulings that have allowed employers to dictate how tips are pooled among employees. It follows a 1999 decision by then-Labor Commissioner Gail Maxwell, who determined that a small Summerlin casino could force dealers to share tips with supervisors.

“Based upon substantial evidence in the record, the plain language of the statutes, and prior case law, the Wynn may unilaterally establish and change a tip pooling agreement that is a term and condition of an underlying at-will employment agreement,” Tanchek wrote.

The issue wasn't clear-cut, however. The state’s tip law lets workers decide with whom to split tips and doesn’t grant such authority to management, though the statute is subject to multiple interpretations.

California-based attorney Jay Litman, who represented dealers in the case, said he was “disappointed” that the ruling avoided any reference to one of the main arguments brought by the dealers -- that the tip-sharing policy violates state law pertaining to how table games are regulated.

“We disagree with the ruling in terms of the law,” Litman said. “He addressed issue of labor law but failed to address issues related to the control of gaming.”

Casinos prohibit supervisors from receiving tips to avoid potential conflicts of interest, as table games supervisors charged with maintaining the integrity of the games could make questionable, harmful or even illegal decisions should they receive a portion of customer tips intended for dealers, Litman said.

The Gaming Control Board, which received a separate complaint about the tip policy last year, has not intervened in the case. While the regulatory agency investigates allegations of cheating or fraud in casinos, it doesn’t typically get involved in civil disputes. That includes tip-pooling policies, which the Board has said are best left up to companies and courts to decide.

In his decision, Tanchek referred to multiple cases brought by dealers who failed to defeat casino efforts in years past to force tip pooling among their ranks.

Until the 1980s, Las Vegas dealers pocketed tips given to them by players or split tips among dealers working certain tables or shifts. Nowadays, tips collected over a 24-hour period are split equally among dealers who worked that day.

Tanchek's ruling references a Nevada Supreme Court decision in 1975 stating that casinos should be entitled to split tips with other types of workers besides dealers, including supervisors.

Floormen, boxmen and cashiers “contribute to the service rendered to the player” the way busboys and waitresses work together to provide customer service to diners, the decision read.

Similarly, Tanchek’s ruling said Wynn’s dealer supervisors, now called “casino service team leads,” perform customer service-related duties such as opening or closing tables to accommodate players, changing out cards, rating play, handling lines of credit, changing limits on tables upon request and “concierge type services such as ordering drinks or making dinner reservations.”

The tip-sharing plan is motivated by management’s sense of entitlement to the hefty tips earned by line workers rather than any change in how the games are operated, as supervisors’ job duties are little changed from before, dealers argued.

State law, they said, prohibits forced tip-sharing by stating that employers may not “take all or part of any tips or gratuities” given to employees.

Though Wynn’s “team leads” oversee dealers and perform supervisory duties, they don’t have the power to hire and fire other employees, nor do they “have control of the business” the way higher-ups do, Tanchek reasoned. Therefore, state law doesn’t prohibit them from also receiving tips, he said.

He also disagreed with the dealers’ contention that Wynn benefited financially from redistributing dealer tips. While Wynn’s company indirectly benefited from the move, the company didn’t retain the dealer tips for its own use but instead used the money to compensate supervisors, he said.

The labor dispute began shortly after Steve Wynn implemented the tip policy in August 2006.

The following month, more than 100 dealers filed anonymous complaints with the Labor Commissioner, whose office issued a press release stating that the policy appeared to be legal but failed to make a formal ruling because the complaints were anonymous.

While one group of dealers filed a class-action lawsuit in September 2006 against Wynn Las Vegas, Smith, the Wynn dealer, pursued a different path by signing her name to an individual complaint with the Labor Commissioner in July 2007.

A state court judge dismissed the previous lawsuit in 2006, saying dealers didn’t have the right to sue over tips and that the matter must be decided by the Labor Commissioner. The Nevada Supreme Court upheld that decision in October 2008.

After waiting for the Supreme Court’s decision, Tanchek began hearing testimony on the Smith complaint in July 2009.

Both parties filed summary briefs and counter-briefs in early 2010. Tanchek has been deliberating on the matter since May, after receiving responses from both sides.

Wynn has said the policy, intended to improve customer service at his casinos, has worked as intended by motivating supervisors to give better service to gamblers and making it easier to recruit them from among the ranks of dealers -- people who often make more than their immediate supervisors. By giving supervisors tips while also increasing their salaries, Wynn has reversed the historical wage gap on casino floors and thus, an industry standard.

Many Wynn dealers, who say the policy cut into their annual, pre-recession earnings by more than 10 percent, dispute the service argument, saying the tip scheme has divided the staff and hurt morale.

Before the tip policy, Wynn dealers earned more than $70,000 per year in tips alone. This tip money was believed to be the highest in Las Vegas at the time because of Wynn’s reputation for operating superior resorts. In anticipation of high tips, dealers as well as supervisors left other casinos to deal cards at Wynn. Some dealers, including Smith, voluntarily left high-paying jobs at Wynn to protest the tip scheme.

During last year’s testimony on the case, a manager at Don Laughlin’s Riverside Resort testified that dealers at the Laughlin casino had been sharing tips with their supervisors for years. Also, a Wynn table games supervisor spoke of the customer service demands of the job and told of receiving tips directly from customers.

Just because something has happened in the past doesn’t make it legal -- or appropriate, Litman said in response to today's ruling.

“That’s like the speeder saying that 10 cars passed him when he was doing 90 miles per hour,” he said.

CORRECTION: A previous version of this story failed to include all of the relevant information. After initially siding with dealers in a dispute with management at the Resort at Summerlin casino, then-Labor Commissioner Gail Maxwell in 1999 reversed her opinion in a letter, stating that the casino's policy of sharing dealer tips with management was legal. | (July 13, 2010)