The Second Circuit recently affirmed a federal district court’s grant of summary judgment to Starbucks in a class action lawsuit brought by company baristas, despite the baristas’ issues with their shift supervisors sharing tips.
The Second Circuit originally sent the case down to the New York Court of Appeals because the case dealt primarily with the state’s labor law. The Second Circuit asked the Court of Appeals to determine what types of employees are eligible to participate in a tip sharing arrangement and what factors the court should use in determining eligibility.
New York Court of Appeals Decision
At the end of each work day, baristas and shift supervisors at Starbucks split all tips received evenly. Baristas brought a lawsuit arguing the shift supervisors should not be allowed to share in the tips because shift supervisors should be considered “agents” of the employer under New York Labor Law §196.
The baristas attempted to persuade the court that the shift supervisors had supervisory responsibility, even if the responsibility was slight. The Court of Appeals concluded that an employee whose personal service to customers is a principal part of his/her duties is permitted to participate in an employer-mandated tip allocation arrangement.
Further, the Court of Appeals held that “the line should be drawn at meaningful or significant authority or control over subordinates,” including responsibilities such as discipline, assisting in performance evaluations, or participating in the hiring or firing of employees.
Second Circuit Application
After the Court of Appeals answered its questions, the Second Circuit held the shift supervisors spent a majority of their times performing the same duties as baristas and mainly served food and beverages to customers. The shift supervisors’ responsibilities of depositing money in the bank, changing cash register tills, administering break periods, assigning baristas to certain positions during shifts, directing the flow of customers, providing feedback to baristas and being able to open and close the store were not enough to establish “meaningful or significant authority” in accordance with the Court of Appeals’ guidance.
Implications
This decision is welcome news for New York employers, especially since the Second Circuit accepted the Court of Appeals’ (the state’s highest court) answers to the Second Circuit’s questions.
Unfortunately, the Second Circuit declared the case has no precedential value, meaning lower courts are not required to follow the decision. Despite this, the decision still lends practical guidance to employers who administer tip pool arrangements.