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Starbucks Appeals $100 Million Tip

June 11th, 2008 Posted by Amelia

A San Diego class action suit has far-reaching implications for restaurant and coffee shop owners nationwide. A California judge ordered latte giant Starbucks to pay tips and interest amounting to more than $100 million to hourly employees. That’s because the employer had unfairly given a share of tips to salaried managers and shift supervisors.

Starbucks estimates that some employees may receive up to $10,000. The company is vigorously pursuing an appeal in the case.

Based in Seattle, Starbucks is the largest specialty coffee drinks company in the world, with more than 15,000 locations in 44 countries. The company adds an average of 7 new locations each day, throughout the world.

Under federal law, tips may be shared in a legitimate tip pooling system. However, a number of suits in the past have demonstrated that the courts will not allow salaried managers and supervisors to be included in tip pooling arrangements. Starbucks management chose to ignore these rulings, partly because shift supervisors often work the front counter during peak times. The retail coffee outlet giant probably concluded that a supervisor who was tending the cash register or making coffee drinks, should be entitled to the same share of tips as an hourly employee performing those duties.

The courts disagree. Time after time, federal courts have ruled that hourly employees are entitled to their tips, and don’t have to share them with management. Restaurant servers may customarily share tips with the bus person. But, when the restaurant is understaffed and the manager buses tables, he or she is not entitled to a share of the tips.

A Starbucks representative said that the decision, “Represents an extreme example of an abuse of the class-action procedures.”

Traditionally, at Starbucks, tips are collected in a tip cup and placed in the company safe. At the end of the week, every employee receives a proportional share of tips based on the number of hours worked. The average comes to $1.71 per hour worked, nationwide, although baristas at some locations receive much more. Starbucks is appealing the ruling that shift supervisors and managers are not entitled to a portion of these tips.