A class action lawsuit
charging Starbucks with violating
laws regarding employee tips has gotten the green light to proceed to trial
from a California Superior Court judge in
Diego
pooling tips that
employers must follow.
Tip-Sharing Charges
The lawsuit was filed in
October 2004 by Jou Chou, a former Starbucks “barista” (counter person) at
shops in
that Starbucks, by permitting shift supervisors to share in tips left by
customers, violated a California wage and hour law that prohibits employers—and
their agents/managers—from taking any part of a gratuity left by a customer for
an employee. Starbucks argues that the shift supervisors are not part of store
management.
The suit, which covers
as many as 100,000 current and former baristas at the coffee chain’s
approximately 1,400 stores in
seeks reimbursement for tips back to October 2000.
The Law
At issue in this case is
California Labor Code Section 351, which provides that a gratuity is the sole
property of the employee or employees to whom it was paid, given, or left for.
Employers or their agents (i.e., managers and supervisors) cannot collect,
take, or receive any such gratuity that a customer leaves for an employee.
Violating this law is a misdemeanor carrying a fine of up to $1,000 and/or 60
days’ prison time.
The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.
Tip-Pooling Arrangements
Despite these
restrictions,
does permit employers to adopt a “tip-pooling” or “tip-splitting” arrangement,
which can be voluntary or involuntary. However, the state Division of Labor
Standards Enforcement (DLSE) says that the following requirements must be met
for a tip-pooling arrangement to be valid:
1. Participants in the
tip pool are only those employees who contribute in the “chain of the service”
bargained for by the patron, as is industry custom. According to the DLSE, employees
who contribute in the chain of service provided to a patron might include, for
example, employees who vacuum, wash, polish, or dry a car in the car wash
industry but not the cashier who collects payment. That’s because cleaning the
car is the service that was bargained for, rather than cashiering.
Other employees in a
chain of service might include: waitpersons, buspersons, bartenders, hostesses,
wine stewards, and “front room” chefs in the restaurant industry; towel or
locker attendants, hair washers, stylists, manicurists, and masseuses in the
salon or spa industry; parking attendants and valet or shuttle drivers in the
car parking industry; and porters, dealers, and runners in the gaming industry.
2. The employer or
agent/supervisor cannot share in the tip pool, even if they provide direct service
to a patron. An employer’s agent includes an individual who has authority to
hire or discharge any employee or supervise, direct, or control employees’
acts.
In one case, a
California appeals court ruled that a restaurant’s “floor managers” were
supervisors and could not legally share in tips.1 The court observed that the floor managers had
the following supervisory duties: 1) scheduling servers’ stations, disciplining
servers, hiring employees, and recommending the discharge of employees; 2)
supervising servers on a daily basis and assuming host duties at the same time;
and 3) hiring servers without consulting management. Plus, floor managers had
authority to discipline employees without the owner’s consent, and the
restaurant’s training manual referred to floor managers as supervisors. The key
issue in the Starbuck’s case is whether “shift supervisors” are in fact
“agents” who are prohibited from sharing in a tip pool. The lawsuit asserts
that these employees are supervisors because, for example, they direct
baristas, adjust schedules, and are in charge when the store manager isn’t
present. But Starbucks is arguing that shift supervisors perform the same
duties as baristas.
3. The tip-sharing
policy must be fair and reasonable. The DLSE says that the purpose behind a tip-pooling
policy is to help ensure that a gratuity left by a patron is fairly distributed
to all employees who contributed to the service the patron received. Thus, there
must be some reasonable relationship between the distribution of the pooled
tips and the degree of service provided by a particular employee or category of
employee. In one case, a court approved a restaurant’s tip-sharing arrangement
that distributed 80 percent of collected tips to waiters and waitresses, 15
percent to busboys, and 5 percent to the bartender.2 The DLSE has pointed out
that an arrangement giving 90 percent of pooled tips to a restaurant host would
be unfair when the host merely directs customers to a table.
Tip-Pooling Tips
It could be some time
before the Starbucks lawsuit is resolved, and we’ll keep you posted on its
status. In the meantime, if you’ve got a tip-pooling arrangement in place,
now’s a good time to review it to be sure you comply with the DLSE guidelines.
Make sure employees who could fall under the category of supervisors aren’t
sharing in the tips and that the distribution is fair and reasonable. It’s a
good idea to put your policy in writing and make sure all employees receive a
copy.
_
1 Jameson v. Five Feet
Restaurant Inc.,
Court of Appeals (Dist. 4) No. G029530, 2003
2 Leighton v. Old
Heidelberg Ltd.,
Court of Appeals (Dist. 2) No. B045636, 1990