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June
3, 2009
Starbucks isn't the only company rejoicing today after a state appellate court overturned an $86 million judgment against the coffee maker in a dispute over how pooled tips are distributed. All employers who administer tip pools view it as a significant victory, according to local legal analysts. The Fourth District Court of Appeals ruled Tuesday that Starbucks' (Nasdaq: SBUX) policy of allowing its shift supervisors to share in money from the company tip jar is legal, contending those employees are not part of management.
"The decision is so great because it provides some clarity and assurance for employers on where the line is drawn between employer and employee, and who may or may not participate in a tip pool," said San Diego attorney Julie Dunne, a shareholder with national labor and employment firm Littler Mendelson.
John Chau, a former Starbucks barista, brought a class-action lawsuit against the company, challenging its policy of letting shift supervisors share in the profits from the tip jar. He claimed they were part of management and prohibited by the labor code from participating in tip pools.
Starbucks contended that for 90-95 percent of their job, shift supervisors perform the same duties as a barista, and they don't have other management duties, like the ability to hire and fire employees. The trial court, however, agreed with Chau and awarded the class $86 million.
Leonid "Lonny" Zilberman, a partner in the San Diego office of Wilson, Petty, Kosmo & Turner, said the appellate court's overturning the trial court seemed like a "common sense" result. "They (the shift supervisors) are hourly employees," said Zilberman, who works in the employment practice group. "That's another thing that the court of appeal clearly recognized. Everybody agreed they were essentially performing the same job baristas were performing."
Zilberman expects the California Supreme Court will take up the case. The high court already has granted review to Lu v. Hawaiian Gardens Casino Inc., which deals with whether card dealers have to share tips with floor runners, chip men and other non-dealer employees.
The justices also have been petitioned to review the decision in Grodensky v. Artichoke Joe's Casino, in which the appellate court ruled that floor managers can share in card dealers' tips.
"Over the years there's been a number of tip pooling cases," Zilberman said. "This (Starbucks case) is a case where, once and for all, the Supreme Court wants to weigh in on this issue and provide guidance on who falls under definition of 'agent of the employer.'"
Littler Mendelson's Dunne doesn't think the state Supreme Court needs to hear the case because the law as the appellate court applied it is so clear.
Zilberman said the decision by the Fourth District provides needed guidance on who is a part of management and who isn't.
"A lot of employers in the hospitality and restaurant industry can have some amount of confidence that folks that are hourly employees, who do not have managerial duties of hiring, firing and setting schedules, are probably OK in the sharing of tips from a collective tip box," he said.
Dunne said the ruling can be helpful to both employers and employees. She said tip jars are meant to prevent disagreements in the workplace about who earns what tips. "It's designed to eliminate that type of friction in the workplace," she said. "Everyone is rewarded for doing a good job." Employers can try to avoid disputes like the Starbucks' one by properly assigning job titles, Dunne said.
However, she added, "The court said that title alone won't dictate (their job status). How they spend their time is going to dictate that." |
