Starbucks Gets a Triple Shot of Damages as $14.1 Million Wage-and-Hour Award Upheld

The penalties for noncompliance with state wage-and-hour laws can be more onerous than that under federal law, which coffee company Starbucks learned the hard way. The 1st U.S. Circuit Court of Appeals recently rejected the company’s appeal of a $14.1 million judgment, finding it had misclassified its shift supervisors under a Massachusetts law and upholding the award — part of which consisted of triple damages as required by a separate state law. (Matamoros et al. v. Starbucks Corp., Nos. 12-1189, 12-1277 (1st Cir. Nov. 9, 2012))

The case arose when Starbucks allowed its shift supervisors to participate in tip pools. Several Starbucks baristas sued the company, alleging that Starbucks’ policy deprived them of their lawful earnings and violated the Massachusetts Tips Act, which prohibits employees with any managerial responsibilities from participating in tip pools. 

According to the trial court’s 2011 judgment, Starbucks’ shift supervisors were misclassified as “wait staff” and thus should not have been included in tip pools. As a result, Starbucks employees who were not shift supervisors were deprived of their tips — more than $7 million worth. A Massachusetts wage law then required the court to triple part of those damages.

Accordingly, the total damage award totaled $14.1 million.

Starbucks’ appeal involved both the classification question and the damages awarded by the lower court. Starbucks argued that: (1) its shift supervisors were correctly classified as wait staff (and therefore, entitled to participate in the tip pool) because they had only limited supervisory tasks and no actual managerial responsibility; and (2) the damage award violated due process because the court tripled (or, in legal parlance, trebled) the total amount of tip pool funds that had unlawfully been paid to shift supervisors.

In ruling against Starbucks on the classification question, the court emphasized the language of the Massachusetts law, its legislative history and guidance from the Massachusetts Attorney General. All three sources, the court held, prohibited finding that shift supervisors could qualify as “wait staff.” 

In upholding the $14.1 million award, the court held that the treble damages provision reflected a “reasoned legislative judgment,” noting that due process issues in damage awards normally arise when the award is issued by a jury — and that wasn’t the case here.

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