Court Will Decide Which Starbucks Employees Take Tips

On Tuesday, May 28th, the New York State Court of Appeals heard oral arguments regarding two suits against Starbucks: Barenboim v. Starbucks Corp., in which baristas claim that shift supervisors were illegally included in tip pools, and Winans v. Starbucks Corp., in which assistant store managers claim they were illegally left out of tip-sharing arrangements.
In both suits, the plaintiffs allege violations of New York Labor Law § 196-d:

“No employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee.”

The Starbucks’ company policy requires that each store place a plexiglass cube container near the cash register and tips put in the cube or handed to an employee are portioned on a prorated basis to each barista and shift supervisor. Baristas and shift supervisors are part-time, hourly employees who are primarily responsible for customer service tasks. Assistant store mangers are salaried, full-time employees who perform customer service tasks and are also responsible for interviewing applicants, making hiring recommendations, processing payroll and other managerial tasks.

The assistant store managers argue that Starbucks violated Section 196-d because customers expect that tips will be distributed among all those seen serving in the stores and that Starbucks is in effect demanding or redistributing their earned share of tips. They also contend that Starbucks violates the New York statute by forcing them to contribute to the collective tip cube that is handed directly to them. Baristas argue that both assistant store managers and shift supervisors are agents of the employer and thus may not lawfully be included in the distribution of tips pursuant.

Southern District Court Judge Laura Taylor Swain granted Starbucks summary judgment and dismissed the plaintiffs’ claims in both cases. The cases were consolidated, and the 2nd Circuit Court of Appeals certified two questions for the New York Court: what criteria should be used to determine whether certain employees are “agents” of their employer, and whether employees who are not barred from receiving tips under 196-d may still be excluded from tip pools.

In California, the 9th Circuit overturned a $100 million verdict for the plaintiffs, and in Massachusetts, the baristas won a $14 million victory, compelling Starbucks to remove shift supervisors from tip pools in that state and increasing their hourly wages. The ruling from the Appeals Court would affect all many employees in the food service industry in New York. If the court rules in favor of the assistant store managers, tips will be spread across more people in service industries, meaning less money for waiters, bartenders, and bussers.

Tip pooling, in our experience, is rarely instituted in a legal fashion. If this sounds familiar, give us a call.