An appeals court in California sided with Starbucks Corp. and on Tuesday reversed a lower-court ruling that the Seattle coffee giant’s tip-sharing policies violated California labor law. The court agreed with Starbucks that shift supervisors may share in customers’ tips.
A class-action lawsuit brought by Jou Chau, a former barista for Starbucks (NASDAQ: SBUX), alleged that the coffee chain’s policy allowing shift supervisors to share in tip money that customers place in jars violated California labor laws. A San Diego lower court sided with Chau in the suit and awarded more than $86 million in damages but on Tuesday, that ruling was overturned.
“We conclude the trial court erred in ruling that Starbucks’s tip-allocation policy violated California law. The applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes,” wrote Fourth Appellate District Court judges, in their decision.
Chau alleged that Starbucks’ shift supervisors should be considered managers and not eligible for tip-sharing. Shift supervisors perform various duties at the company’s stores, such as making coffee drinks, cleaning tables, cleaning bathrooms and working the cash register, and Chau said they shouldn’t be allowed to share in the tips collected in the plastic containers at each store location. The lower court awarded more than $86 million in damages plus interest, with the total award estimated at more than $100 million.
Starbucks countered that all baristas and shift supervisors are eligible to share in tips, and the appeals court agreed.
“It is undisputed here that the tipping public intended to collectively tip both the baristas and the shift supervisors — for their work as a ‘team,’” wrote the appeals court.