Appeal Court Says, "Hold the Foam" on Starbucks Tipping Case
Some plaintiffs attorneys received a huge pay cut today, after the California Court of Appeal reversed an $105 million judgment against Starbucks.
The case involved the ever-present tip jar that sits by the register at your favorite Starbucks. It is the procedure of Starbucks, like most every other business that has a tip jar, to split up the tips among all those that were working, including the “supervisors.” As we analyze this case, keep in mind that a “supervisor” at a Starbucks is most likely just another barista that has been there slightly longer than the other baristas, and as a result is put in charge. It’s not like this is someone at the corporate office.
Enter California Labor Code section 351, which states that no “employer or agent” shall take any part of the gratuity “left for an employee by a patron.” An “agent” is defined by section 350(d) as anyone who can hire or fire, or who controls the acts of the employees.”
These rascally class action attorneys thought they had Starbucks by the beans. First they created a somewhat fictional perception of the role of the “supervisors” and spent a great deal of time in the case arguing that they were agents of the employer because they directed the conduct of the other employees. From that viewpoint, it was easy to claim that Starbucks had violated section 351 by including the supervisors in the tip distribution. Judge Patricia Cowett in San Diego Superior Court must have skipped her coffee that day and bought that reasoning and awarded the class of 100,000 baristas $86.7 million, which grew to $105 million with interest.
But the Court of Appeal said, “hold the foam.” The flaw in the logic is obvious (understanding that I always have perfect 20-20 hindsight with court decisions). When I sit down at a restaurant, enjoy my meal and the service, and then leave a tip, I am leaving a tip for my specific server. However, when I order a latte at a Starbucks and drop my change into the tip jar, who am I tipping? I'm certainly not intending to tip only the barista. At that point, I don’t even know who is going to prepare my beverage (or even if it will be tip worthy). It is probably far more likely that I'm tipping the friendly cashier that accurately took my order and retrieved my scone. Or perhaps my intent was to tip the person that cleaned the washroom where I washed my hands before stepping up to the counter. As you can see, in the case of a community tip jar, we can never truly know who generated the tip, so it makes much more sense to assume that it is my intent to tip everyone working there, who have all joined to make this such a special coffee experience, from the supervisors down. Indeed, the Court of Appeal concluded that the purpose behind section 351 was to “prevent a fraud on the tipping public” by prohibiting an employer from giving a tip left for a server to someone not intended by the tipper. There is no such fraud with the Starbucks tip jar.
Further, the “supervisors” are not “agents” of the employer in the sense meant by section 350. The supervisors are not there to grab the tips on behalf of a greedy Starbucks organization; they are just more experienced baristas, probably earning 50 cents per hour more and completely entitled to share in those tips.
The ruling of the Court of Appeal reversed the judgment.
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California labor code states, No employer shall take, "collect" or recieve any part of the tips or gratuities paid, given or left for an employee by a patron.
It goes on to state that, Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.
What the law is stating is that the customer's tip cannot be collected and distributed by an employer. What the law is stating is that it is the patron's legal right to determine who should receive his tip. That's why state laws explain that no employer shall collect any part of the tips paid, given or left for an employee.
While several judges in California have suggested that state laws do not prohibit an employer from collecting tips so they may be distributed to certain types of workers and that state laws only prohibit employers from taking the tips customers present, the language of the law indicates that such judges are simply lying.
When employers are errantly allowed to collect tips, tips become the property of those the employer wants to include in his tip pool.
Judges who rule that California labor code does not prohibit employers from pooling the customer's tip are not only defying and contradicting the language of the law, they are contravening state law.
The way the law is currenly being misinterpretted, tips are no longer the sole property of the employee or employees to whom they are paid, given or left for, tips are the property of whom-ever the employer wants to give them to.
Employers in California have successfully contravened state law and may now take the customer's tip, thanks to, a few corrupt judges.
Gerry,
Thank you for your detailed comment, but let's keep the discussion civil. Because some judges interpret the law differently than you, it doesn't make them "liars" and/or "corrupt."
You have recited the statutes but you have not applied them to the facts presented. As you can see from the article, the application of the law is very fact specific. The court correctly agreed with you that the tip should go where the customer intended. The issue, as I read the case, is the customers' intent when they leave a tip. But that intention cannot be known in the case of a community tip jar. Even if I can see the barista, the tip I leave is more for the friendly cashier. I want everyone behind the counter to split my tip, even the owners if they are present and working. That will be the fun case -- the one where the business owner is also the one working the register.
Who do you think should get the tips from the tip jar?
I don't think tip jars should be legal unless they provide the customer his right to determine who his tip is intended for. State and federal laws cannot properly protect the customer's tip when employers intentionally prevent customers from determining who their tip is intended for.
For instance, what if a customer only wants to tip the cashier at Starbucks? With a tip jar, the customer is unable to tip just the cashier. The thing is, there are two forces at work here. The first is the fact that California currently allows employers to require that employees pool their tips. What this means is that if you personally give the cashier a tip, the employer can force the cashier to put it in the jar. The employer can also fire the cashier for not putting your tip in the jar because several rulings have proclaimed that state laws do not prohibit an employer from requiring the pooling of tips. The second fact of the matter is, tips placed into a tip jar cannot be claimed by one employee due to the fact that the jar has no one's name on it. How would the cashier claim that all the money in the jar belonged to him when his mame isn't even on the jar?
So who should get the tips from the tip jar? The way I see it is, employers should not be allowed to force their workers into pooling their tips. State laws clearly explain that no employer shall collect any part of the gratuities paid, given or left for an employee. If employees want to put out a tip jar, they are not prohibitted from collecting tips in such a manner. However, under state law employers are prohibited from putting out a tip jar for the collection of tips.
When state laws are interpretted as allowing employer to require tip pooling, a tip jar simply becomes a vessel to hold money the employer will control to his interests. The fraud in this particular case is, the employees have no say or control over the moneys placed into the tip jar. How can the money placed into a tip jar be a tip when state laws define tips as the sole property of the employee or employees to whom it is paid given of left for? Money placed into a tip jar is not money paid, given or left for any particular employee or for any particular group of employees.
What employers are doing when they put out a tip jar is soliciting money that they may utilize to their interests. Unless the jar has names on it, no one employee, or for that matter, no group of employees can claim that the money is theirs. Another problem that is created with tip jars is, what amount is each employee entitled to? Again tips jars prevent the customer from determining how much each worker should receive. When a tip jar is put out by an employer an employee has no way of proving that he is entitled to a certain percent of the money. Again, the employer is simply preventing customers from entitling a worker to their tip.
Tip jars should be controlled by the employees. However when their employer prevents them from putting their name on the jar and when their employer is allowed to require that all tips be pooled, the tips placed in the tip jar cannot be controlled by the employees due to the fact no one knows who they were intended for.
Nice scam isn't it? Put out a tip jar and make people think that it's for their favorite workers while all along you, the owner know, you will contol the money to your interests.
Now that's how you advocate your position, Gerry. A very good application of the facts to the law, without calling anyone a liar or corrupt. Well done.
Not all companies distribute tips to EVERYONE who worked that day. I worked for Peet's Coffee and Tea for just over a year. The manager and assistant manager, which were our "Supervisors", never received tips. It is Peet's policy that only hourly employees receive tips, and Managers/Asst.Managers are not hourly.