June 26 (Bloomberg) -- Starbucks Corp. baristas must share tips with shift supervisors, while assistant managers can be excluded from gratuity pools, New York’s highest court said in answering questions posed by a federal appellate panel.
The world’s biggest coffee chain was sued in 2008 in federal court in Manhattan by two former baristas who accused the company of violating state labor law by including shift supervisors in tip pools. A group of assistant managers sued in the same court, saying they were illegally excluded from the pool.
A federal court in Manhattan supported Starbucks in both suits, ruling that shift supervisors can share in tips because they have limited managerial responsibilities while it wasn’t obligatory to include assistant store managers in gratuity pools.
The plaintiffs in both cases appealed and a U.S. appellate panel in New York asked the state’s highest court in Albany to answer two questions: What factors determine whether an employee is an agent of his employer and ineligible to receive distributions from a tip pool; and does state law permit employers to exclude eligible employees from such pools?
The seven-member Court of Appeals in Albany today said under state law employees whose main duties are serving patrons can participate in tip pools. That would include shift supervisors, whose primary responsibility is to serve food and beverages, and not assistant managers, who participate in hiring or firing workers.
“An employee whose personal service to patrons is a principal or regular part of his or her duties may participate in an employer-mandated tip allocation arrangement” under state law, Judge Victoria A. Graffeo wrote, “even if that employee possesses limited supervisory responsibilities. But an employee granted meaningful authority or control over subordinates can longer be considered similar to waiters and busboys.”
Starbucks believes customers should have the option to reward employees who provide great service, and the company’s tipping policy ensures that workers who directly serve the public share equally in the tips, Jamie Riley, a spokeswoman for the Seattle-based company, said in a phone interview.
“We believe our tipping policy is fair and appropriate under New York state law,” Riley said.
Shannon Liss-Riordan, an attorney in Boston who represents the baristas, said in an e-mail that shift supervisors exercise meaningful authority over baristas and that the trial court erroneously applied too stringent of a standard.
“I’m disappointed that the court did not apply the language the legislature used in saying that agents includes supervisors, but I believe we still win under this standard,” Liss-Riordan said.
Two judges dissented from today’s majority ruling. Judge Robert S. Smith said New York state law doesn’t preclude employees with supervisory authority from sharing in tip pools and that employers are allowed to exclude certain types of workers from such arrangements.
Smith cited a California appeals court decision from June 2009 that reversed a lower-court ruling ordering Starbucks to pay $86 million in restitution for allowing shift supervisors to share in servers’ tips.
“Neither the boss nor (with some exceptions) a fellow worker may take or demand part of a worker’s tips,” Smith wrote. “No one is doing that in this case. This case involves tips not given to any particular employee, but put in a common pool. The only issue is how the pool is to be shared among the people who earn the tips -- a subject on which the statue has nothing to say.”
“No doubt, if Starbucks itself were taking a piece of the pool, or if higher-level employees were coercing baristas to give up part of the share that Starbucks allotted them, the statute would be triggered, but that is not what is going on,” Smith said.
Judge Jenny Rivera agreed with the majority that employees who exercise authority or control over subordinates are agents of an employer, while saying that the court doesn’t need to determine whether companies can legally exclude some workers from pools if those workers are determined to be agents, such as assistant managers.
“The record indicates that all four classes of Starbucks employees are garbed in similar uniforms and engaged in customer service duties,” Rivera said. That leaves the underlying question unresolved as to whether customer service is a principal part of the job of an assistant manager, she said.
The cases are Barenboim v. Starbucks Corp., 03318-cv-2008 and Winans v. Starbucks, 03734-cv-2008, U.S. District Court, Southern District of New York (Manhattan). The appeals are Barenboim v. Starbucks, 10-4912, and Winans v. Starbucks, 11-3199, U.S. Court of Appeals for the Second Circuit (Manhattan).
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