Starbucks’ Tip-Sharing Policy Results in $105 Million Award to California Baristas

Who does your tip go to for that delicious, morning low-fat vanilla latte from Starbucks? Apparently in California, a percentage of it was going to shift supervisors and shift leads. On March 19, a California Superior Court found that Starbucks’ company policy for baristas to pool tips with supervisory workers violated California law and ordered the Seattle-based beanery to pay $105 million back to over 100,000 baristas.

The class action was brought on the behalf of all baristas who worked at any California Starbucks dating back to October 8, 2000. The complaint alleged that the baristas were forced to share approximately $86,687,926 worth of tips with supervisory personnel. In its defense, Starbucks essentially argued that the individuals with the job title “shift supervisor” were entitled to share tips because they were also pouring coffee, waiting on customers and performing tasks similar to the baristas. Starbucks argues this was based on its corporate culture which preached teamwork and the practice of asking rather than telling people to perform tasks. Basically, Starbucks tried to demonstrate that although the supervisors were paid more, assigned tasks and directed the baristas, they really weren’t supervisors because they asked the baristas to perform tasks, they didn’t tell them to perform tasks. The court was not moved by Starbucks’ defense.

According to the court, under California law, “tip pools” were permissible, but if the pool includes “persons who are either the employer or the agent of the employer, that status disqualifies them from sharing in the tips.” Thus, the court focused on whether those bearing the title of shift supervisor or shift lead, “supervise, direct or control the acts of the employees.” It was irrelevant that the shift supervisors and leads “asked” rather than “told” the baristas to perform tasks.

The award fashioned by the court was based on over 50,694,694 hours of work logged by shift supervisors and the average amount of each tip of $1.71. Starbucks’ officials have stated the company plans on appealing the decision and will seek a stay of the order against tip pooling while the appeal is pending. “Starbucks believes that our shift supervisors deserve their fair share of the tips,” the company said in a statement.

The importance of this case lies not in the violation itself. Those employers who are located outside of California and who do not have tipped employees will not be affected by this judgment. Nevertheless, every employer should recognize the lesson here – violations of state wage and hour laws could lead to penalties and awards as devastating as those that result from violation of federal law. Every state has its own wage and hour law; thus, compliance with federal law is only half the battle. Be sure to confirm your wage and hour practices (and all your HR practices, for that matter) are in compliance with both state and federal laws. Consult with a qualified labor and employment law attorney if necessary.

Brody and Associates regularly provides counsel to employers on all labor and employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.