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	EMPLOYMENT LAW UPDATE: Appellate Court in San Diego Leaves An $86 Million Tip for Starbucks Employment/Labor  By David B. Ezra The increasing popularity of the class action vehicle is forcing California courts to wrestle with “tip pooling” and other employment issues relating to tipping practices on an increasing basis. Chau v. Starbucks Corp. was decided on June 2, 2009, and it stemmed from a class action lawsuit against Starbucks based on “shift supervisors” sharing tips that were placed in a collective tip box with so-called “baristas.” At the trial court level, the judge found in favor of the plaintiffs and awarded the class $86,000,000 in restitution. At Starbucks, baristas operate the cash register, make coffee, serve pastries, wash dishes and clear tables. Shift supervisors tend to be more experienced employees who served as baristas previously, and who still spend “more than 90 percent of their time performing the same service tasks as do the baristas.” Baristas and shift supervisors rotate duties throughout the day, working as a team. Both sides agreed that customers who placed money in the collective tip boxes intended to reward all of the service employees. There was no dispute about the fairness of Starbucks’ division of the collective tip box money, since the division was based on time worked by each employee. Nevertheless, the trial court had found that Starbucks’ approach to the collective tip box issue violated California Labor Code section 351, which says “no employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron . . . .” In reversing the $86,000,000 award against Starbucks, the appellate court drew a sharp distinction between “tip pooling” where tips given directly to an employee have to be shared with other employees who are in the chain of service, on the one hand, and the collective tipping scenario the Starbucks case presented, on the other. Essentially, rather than viewing the shift supervisors as agents of Starbucks, they were viewed as employees who were providing a service for customers. Shift supervisors were viewed as the intended recipients of some part of the tips that were left in the collective tip boxes. The appellate court held that “permitting Starbucks to effectuate the customer’s intent by mandating equitable sharing of a collective tip box among these service employees . . . protects the personal property of the employees and ensures a fair distribution of the gratuity to those who earned it . . . .” The court emphasized that employers are empowered to exercise control over their business in order “to ensure an equitable sharing of gratuities among the employees who provide service to the patrons.” The court rejected the baristas’ argument that if Starbucks’ policy was upheld, it would mean that a store manager (who spent very little time actually servicing customers, and who had the power to hire and fire) could also share in the tip proceeds. The court emphasized that Starbucks’ policy prohibits store managers and assistant managers from collecting any tips from the tip boxes. And the court noted that if “Starbucks was to institute a policy permitting its store managers to share proceeds from a collective tip box, the facts would not be the same and would implicate issues not presented here; therefore our legal reasoning and conclusions would not be controlling.” The employment law aspects of tipping continue to be aggressively litigated, particularly in class action contexts. Businesses that involve tipping will want to keep a close eye on the development of the law. Most recently, the California Supreme Court granted review of Lu v. Hawaiian Gardens Casino, Inc., 170 Cal.App.4th 466 (2009) on April 29, 2009. The appellate court that decided Lu held that Section 351 did not bar tip pooling in casinos but there were triable issues of fact as to various levels of employees who might be prohibited from participating in the tip pooling because they were “agents” of the employer. The Supreme Court will address the issue of whether Section 351 creates a private right of action for employees. It is very possible that the supreme court’s decision in Lu will add additional certainty for employers who have to deal with tipping practices as part of their business operations. Back
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