A panel of judges at the U.S. Court of Appeals in Boston has upheld an earlier ruling in favor of Massachusetts baristas, holding that Starbucks violated the state’s tip law for allowing supervisors to take a cut of their tips.
Our Boston employment lawyers understand that the coffee giant has been ordered to pay $14.1 million for violating the state’s tip law. The class action lawsuit was originally filed back in 2008, and last year, a federal judge ruled against the company, which had appealed that decision.
Starbucks could decide to appeal again, though it seems unlikely they will, given a statement released by representatives shortly after the decision was made. The representatives stated they would respect the court’s ruling by changing the tipping policy in Massachusetts. It was still evaluating the best way to do that in order to be in compliance with state law.
Massachusetts has some of the best protections for tipped employees in the country, and this case should put employers on notice that they must follow it.
If you aren’t familiar, the law is found under Mass. General Laws, c. 149, s.152A. Specifically, it requires two things:
1. A tipped employee has to be paid a minimum of (currently) $2.63 each hour, so that the employee can receive at least $8 per hour (or whatever the minimum wage is) by including tips. If the total hourly rate for the employee doesn’t even out to minimum wage, the employer has to make up that difference.
2. An employer can require a tipped employee to divvy up those tips into pools with other service staff, bartenders or servers. However, that portion has to be paid in fair proportion to the amount of services provided, and under no circumstances can management, owners or supervisors take a portion of the employees’ tips.
The law is very clear in this regard.
However, Starbucks tried to argue that shift supervisors didn’t technically have responsibilities that were managerial.
But as supervisors, the appellate court ruled, these individuals were barred from sharing in those tip pools.
Baristas usually make the standard minimum wage, and then the tips, which are collected in a jar at the register, are divvied up at the end of each shift.
This specific ruling will affect an estimated 11,000 Massachusetts employees who worked at Starbucks between 2005 and 2011. It’s estimated that with interest, the total amount of damages could equal as much as $18 million.
There is actually a second, similar case pending against the coffee giant as well. That case was filed subsequent to the first case, once it became obvious that Starbucks was continuing its practice of pooling tips to supervisors.
That second case had been stayed, pending the ruling by the U.S. Court of Appeals. That case could force the chain to shell out another $6 million.
Starbucks isn’t the only company to run afoul of Massachusetts tip laws. Dunkin’ Donuts, for example, is facing similar allegations of managers sharing in those tip pools. Last year, a franchise owner filed a suit intended to change state law, hoping to allow shift supervisors to be included in tip pools. A decision on that is pending.