Tip CupBoston — Massachusetts Dunkin’ Donuts franchise owners went to bat for their employees this week, asking the state legislature to modify a state law that has limited or stopped many shops from accepting tips from their customers.

Rep. Linda Forry ((D-Dorchester), sponsor of the proposed change to what was described as “ambiguous language” in the law, testified before the Joint Committee on Labor and Workforce Development. She was flanked by Dunkin’ Donuts Independent Franchise Owners (DDIFO) President Jim Coen and franchise owners Robert Branca and Clayton Turnbull.

Coen told the committee, chaired by Sen. Thomas McGee (D-Middlesex/Essex) and Rep. Cheryl Coakley-Rivera (D-Hampden), that the current law was intended to prevent managers and executives from siphoning tips away from their lower-wage employees. But he said the law has resulted in unintended consequences because it “denies tips to nearly everyone in the team service environment that many quick service restaurants such as Dunkin’ Donuts utilizes, because at some point during most shifts, even when a shop manager is present, some crewmembers perform at least one managerial function.”  
The issue is the law’s definition of “managerial authority.”
Passed in 2004, the law says, “Tip sharing is permitted, provided that the distribution of the tips is limited to wait staff employees, service employees and service bartenders.”
The Massachusetts Attorney General, interpreting the legislation, ruled that “Anyone who has any superiority in rank over another employee cannot share or receive any tips or service charge, whether or not part of their work includes working alongside or with the employees serving the patrons directly. This includes shift leaders, supervisors, managers, assistant managers and anyone who can direct another employee on his or her job responsibilities.”

Forry’s proposal would define managerial authority to limit it to managers, who:
1) have hiring and firing authority,
2) regularly oversee at least two employees, and
3) work in an establishment where some employees are paid below minimum wage and derive much of their income from tips.

The committee took no action on the proposed revisions to the law. The committee staff told the Dunkin’ Donuts team that it may set up a working group of restaurant owners to hammer out the language of the revised legislation. DDIFO government affairs consultant Joe Giannino said he was told the legislators do not want to cause restaurants other unintentional problems.

Branca, who owns Dunkin’ franchises in Worcester and serves as the DDIFO’s Legislative Affairs Coordinator, told the committee that “the law is ambiguous. Franchise owners want to comply with the law, but we need to know what the law is.”
In his and other many Dunkin’ Donuts franchises, he said a shift supervisor “is often a teenager with three months more experience than the other teenagers.”

Branca and Turnbull told the legislators that at Dunkin’ Donuts, shift leaders work the counter to maintain good customer service during peak periods “They are there to make sure a customer who orders black coffee gets black coffee,” said Turnbull, who owns several Boston franchises including several at Logan Airport.

In addition, many shift leaders at Dunkin’ shops do not have the authority to hire or fire employees, the said. Branca and Turnbull asked the legislators “to make it simple.”
Turnbull said the tips add about $2 an hour for his employees. “This is not small beans.”

Branca said the confusion in the definition of managerial authority has resulted in class action law suits against franchise owners. Other suits have been filed on behalf of employees across the country in New York and California. In Massachusetts, “the statute mandates triple damages plus 12% interest and attorney fees, even where there was no intent to violate the statute and where no actual manager shared in any tip pool,” Coen said in prepared remarks given to the legislators.

As a result of the 2004 law, many quick service restaurants—Dunkin’ Donuts included—have removed tip jars and will not allow employees to accept tips.

Coen told the committee that Dunkin’ Donuts franchisees operate 1,350 shops in the state and employ more than 25,000 workers statewide. The sales tax revenues to the state collected from Dunkin’ operations is more than $67 million. And the total investment by Dunkin’ franchise owners in the state exceeds $3 billion.

Ironically, Dunkin’ helped create “the culture of tipping at coffee and donut shops” when the chain was founded in the 1950s and waitresses served coffee in ceramic cups at the counter, Coen said.