$86 million judgment reversed in Starbucks’ tip-pooling suit

Is a Starbucks shift supervisor who works alongside baristas considered as just part of a customer service team when it comes to taking a cut of the pooled tips? Apparently so, a California appeals court ruled (Chau v Starbucks Corp, CalCtApp, June 2, 2009) when it recently reversed an $86 million judgment against Starbucks in a class action suit in which the trial court found the coffee chain violated state law by including the supervisors in tip pools.

The lower court’s ruling, the appellate court reasoned, was improperly based on a line of decisions addressing an employer’s authority to mandate that a tip given to an individual service employee must be shared with other employees. It noted that Starbucks’ shift supervisors are part-time employees who perform all the duties of a barista, along with having responsibility for additional tasks, including supervising and coordinating employees within the store. There is no decisional or statutory authority prohibiting an employer from allowing a service employee to keep a portion of the collective tip, the court said, in proportion to the amount of hours worked, just because the employee also has supervisory duties.

While acknowledging that sec. 351 of the Labor Code, which Starbucks was found to have violated, was enacted to prevent employees from having to give up their earned gratuities as a condition of employment, the court concluded that it was undisputed in this case that the tipping public intended to collectively tip both the baristas and the shift supervisors for their work as a “team.”