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"How would you like your class action lawsuit served—tall, grande, or vente?"

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April 2008

WAGE AND HOUR UPDATE


Court Serves a Bitter Brew to Coffee Chain
$105 Million Awarded in Tips Case


By Christopher W. Olmsted

How would you like your class action lawsuit served—tall, grande, or vente? An employee class action lawsuit that recently concluded in San Diego against Starbucks serves as a reminder to all restaurants, hotels, and other hospitality businesses: be careful who shares in the tip pool.

As reported in the San Diego Union Tribune, “the lawsuit was filed by a former Starbucks barista at stores in La Jolla and Hemet who complained that shift supervisors were sharing in employee tips.” The court subsequently certified a class action that included approximately 120,000 baristas who worked for Starbucks between October 2000 and February 2008.

Under California law, managers and supervisors may not share tips. In its defense, Starbucks sought to prove that the shift supervisors were not really supervisors. “Although the class action paints shift supervisors as part of the Starbucks' management team, Starbucks contends that they are not part of management and perform essentially the same jobs as baristas.”

On a ruling issued February 28th, the court rejected Starbucks’ defense. The court found that shift supervisors “both supervise and direct the acts of the baristas.” After the court found that Starbucks was liable for a violation of California law, at a subsequent hearing held on March 20th, the court awarded over $105.7 million in damages and interest.

The judge calculated that the shift supervisors took the equivalent of about $1.71 in tips per hour worked. She calculated that shift supervisors had deprived baristas of a total of $86.6 million in tips. She also awarded $19.1 million in interest. It is expected that the court will also award a substantial attorney fee, along with court costs. Additionally, the court issued an injunction prohibiting the coffee chain from distributing tips to supervisors in the future.
Starbucks has promised to appeal the award.

Tips On Employee Tips:


You can limit the risk of being served with a vente class action lawsuit by reviewing your policies for compliance with the following rules:

  • An employer may mandate tip pooling.
  • Neither the restaurant nor its “agents” may receive any part of the tips. In the Starbucks case, the debate centered on whether the shift supervisors count as “agents.”
  • Regarding “agents” who may not share gratuities, the Labor Code defines “agents” to mean “every person other than the employer having the authority to hire or discharge any employee or supervise, direct, or control the acts of employees.”
  • For restaurants, tips can only be shared with those providing customer or table service. (See the DLSE FAQ referenced below for common examples.)
  • The division of pooled tips must be “fair and reasonable.” There are no precise guidelines under state law, but the DLSE and one court case have approved a 15% allocation to the busboys and 5% to the bartender.
  • Mandatory service charges (e.g. 15% added to the cost of a banquet) are not considered gratuities, and are not subject to the tip pooling rules.
  • More Info: The DLSE has FAQ on its interpretation of California law regarding tips. You can find it here or on the DLSE’s website.

    More Legal Update articles.
    Download entire April Legal Update in PDF format.


    This article is intended as a brief overview of the law and are not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2008 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved.





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