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The Post-Dispatch, Robert Cohen/AP

Starbucks Tip Jar Battle May Be Headed to Supreme Court

June 10, 2009 05:56 PM
by Liz Colville
A state appellate court in California overturned a $106 million judgment against Starbucks’ method of paying out tip jar funds. But the battle isn’t over yet.

Starbucks Off the Hook—for Now

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San Diego’s 4th District Court of Appeals has ruled that Starbucks was not in violation of California labor laws for distributing funds from tip jars to both baristas and shift supervisors, The San Diego Union-Tribune reported.

The decision nullifies last year’s ruling by the San Diego Superior Court, in which Judge Patricia Cowett said Starbucks had violated a state law.

“Under California state labor laws, it is legal for employers to implement tip pools where employees are required to share tips,” Forbes explained following the 2008 ruling, “but recipients of the pool share may not be owners, managers or supervisors.”

Starbucks “contested the [previous] ruling, arguing that shift supervisors spent as much as 95% of their time performing the same duties as baristas, including taking orders and making coffee,” the BBC reports.

Justice Judith Haller seemed to agree, adding that customers “intend for the tip to be shared among all the workers when they drop their money in the jar,” Greg Moran wrote for The Union-Tribune.
Haller wrote in her decision, available in PDF format on The Union-Tribune Web site, that “applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes.”

The case notes that Starbucks has a “detailed written policy” on tips, specifying that they are to go in a “standard 4” x 4” plexi cube container” placed near cash registers and unmarked. The tips are distributed weekly to any employee who worked during that week. Customers are also permitted to tip individual workers and those tips are not shared.

The plaintiffs will try to take the case to the California Supreme Court. As one of their lawyers, David Lowe, explained to The Union-Tribune, “This is the first case that says you can include agents or supervisors in tips. The court here is carving out a new rule that says you can include supervisors if they spend a lot of time serving customers.”

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Background: The previous ruling against Starbucks

The original 2004 class action lawsuit against Starbucks represented some 120,000 California baristas working at the company from 2000 to 2008. Brought to court by former barista and college student Jou Chau, the suit asserts that the Starbucks tip-sharing policy “violates the Unfair Competition Law (UCL) … based on a violation of Labor Code section 351,” as the document of the June 2 decision reads, available on The Union-Tribune site as a PDF.

In March 2008, Superior Court Judge Patricia Cowett ruled that Starbucks' tip pool policy violated California’s labor code, because “agents” of the company, or the shift supervisors, were sharing tips with baristas. The case revealed that money from the jars was divvyed up to employees based on the number of hours worked and that the average tip received was $1.71 an hour.

Opinion & Analysis: Next steps for Starbucks and plaintiffs

In the FindLaw blog Law & Daily Life, Javier Lavagnino explained the court of appeals decision, noting that “because baristas and their shift supervisors work as a team to provide service for customers, it would be misleading the public to have tips from a collective tip box go only to baristas.”

He added, however, that “a variety of laws at both the state and federal level can apply to determine whether an employee: a) qualifies for a tip; b) is properly receiving their tips; and c) is being paid properly despite receiving their proper share of tips.”

Your Honor I Object, a blog on the federal and California courts, argues that “[i]f Starbucks is right that about 95% of the time shift supervisors render customer service, it appears the Appeals Court has it right: case dismissed.” But the blogger adds that a “nominal settlement and re-formulation” may be more beneficial to both sides than continuing with the current case, suggesting that by taking the case to the Supreme Court, both sides will incur even more legal fees and Starbucks will likely draw more negative attention to itself.
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