The First Circuit Court of Appeals recently upheld a trial court decision in favor of employees (baristas) of Starbucks on their claim that the company illegally deprived the baristas of tips owed to them by including managerial employees in the tip distribution. (Matamoros v. Starbucks Corp., Docket No. 12-1189) In their class-action lawsuit, the baristas alleged that Starbucks’ policy allowing shift supervisors to receive a portion of customer tips violated the Massachusetts Tips Act (M.G.L. c. 149 § 152A). The trial court judge determined that shift supervisors should not have been permitted to participate in the distribution of tips and awarded the baristas over $14 million in damages.
Starbucks argued on appeal that because the shift supervisors’ primary duties involve serving customers, they were included among ‘wait staff employees’ who are allowed to receive a portion of pooled tips under the law. Starbucks also pointed out that, like baristas, shift supervisors are hourly employees who often work part-time and most of that time is spent serving food and coffee.
The Court was not persuaded, citing the specific definition of eligible employees under the Tips Act, which limits ‘wait staff employees’ to those who possess ‘no managerial responsibility.’ Because the shift supervisors’ duties involve some degree of management, the First Circuit reasoned, they are not eligible to share in the barista’s tip pool. In addition to serving customers, shift supervisors open and close the stores, handle and accounts for cash, and oversee other employees while on shift. In reaching its decision, the Court relied on an Advisory from the Massachusetts Attorney General’s Office, which states, in relevant part, that ‘workers with limited managerial responsibility, such as shift supervisors…do not qualify as wait staff employees.’
This decision helps clarify the extent to which courts will limit the eligibility of employees to share in tip pools, and what degree of supervisory duties will disqualify employees from receiving a portion of the tips. In cases arising under a prior version of the Tips Act, courts permitted employees to share in tips if their “primary duty” was to serve customers. Here, the Court strictly applied the language of the revised statute, stating “no means no, and we interpret that easily understood word in its ordinary sense: ‘not any.’”
In light of this and other similar cases, employers who allow for the pooling and distribution of tips must diligently supervise the process, to ensure that only eligible employees receive a share of tips. Because a) the law provides for multiple damages and reimbursement of attorneys fees and b) there are relatively few defenses available to employers, employees have strong incentives to pursue claims relative to improperly distributed tips and management is encouraged to strictly comply with the rapidly evolving wage statute.