Calif. Court Rejects $100m Starbucks Award

A California appeals court Tuesday reversed a $100 million-plus award to baristas working for coffee giant Starbucks Corp who had sued the company for allowing supervisors to share in proceeds from tip jars in violation of state labor laws.

The class action was brought on behalf of about 120,000 current and former Starbucks baristas in 2004 by Jou Chau, a college student and former barista, and accused Starbucks of improper tip pooling by letting shift supervisors share in tips with the entry-level, part-time, hourly baristas.

Chau's attorneys argued that Starbucks was using tips to subsidize labor costs for the shift supervisors instead of paying them a higher wage.

A trial judge in San Diego County awarded the baristas $86.7 million in restitution plus interest after a trial without a jury, ruling that the policy violates California's Unfair Competition Law. The judge also barred Starbucks from continuing to distribute tips to shift supervisors.

But the Fourth District Court of Appeal found that Superior Court Judge Patricia Cowett had wrongly based her ruling on legislative and case law governing how employers carry out tip pooling, including a statute prohibiting owners, managers or supervisors from sharing in or taking employee tips.

The court noted that Starbucks shift supervisors "are also part-time hourly employees who perform all the duties of a barista, but are also responsible for some additional tasks." They do not have power to hire, fire or discipline baristas, and spend most of their day serving customers, the court said.

"There is no (legal) authority prohibiting an employer from allowing a service employee to keep a portion of the collective tip, in proportion to the amount of hours worked, merely because the employee also has limited supervisory duties," the court wrote in its opinion.

The appeals court reversed the ruling and ordered the trial judge to "enter judgment in Starbucks' favor."

Plaintiffs attorney David Lowe said the baristas "will be looking to the California Supreme Court to correct the Court of Appeal's legal mistake."

"The Court of Appeal departed from established cases and misinterpreted the Labor Code in reversing the trial court's well reasoned decision," Lowe said in a statement.

Starbucks said the ruling "validates our longstanding tip policy, which ensures that both baristas and shift leads .... receive a fair share of the tips that customers leave for the legendary service they provide."

An attorney for the baristas could not be reached for comment.

The case is Jou Chau vs. Starbucks Corp, No. GIC836925, San Diego Superior Court.