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.
