Calif. Court Rejects $100m Starbucks Award

June 2, 2009 — -- A California appeals court Tuesday reversed a $100 million-plus award to baristasworking for coffee giant Starbucks Corp who had suedthe company for allowing supervisors to share in proceeds fromtip jars in violation of state labor laws.

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

Chau's attorneys argued that Starbucks was using tips tosubsidize labor costs for the shift supervisors instead ofpaying them a higher wage.

A trial judge in San Diego County awarded the baristas$86.7 million in restitution plus interest after a trialwithout a jury, ruling that the policy violates California'sUnfair Competition Law. The judge also barred Starbucks fromcontinuing to distribute tips to shift supervisors.

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

The court noted that Starbucks shift supervisors "are alsopart-time hourly employees who perform all the duties of abarista, 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 fromallowing a service employee to keep a portion of the collectivetip, in proportion to the amount of hours worked, merelybecause the employee also has limited supervisory duties," thecourt wrote in its opinion.

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

Plaintiffs attorney David Lowe said the baristas "will belooking to the California Supreme Court to correct the Court ofAppeal's legal mistake."