Starbucks Liable to Baristas For $14 Million

First Circuit Court of Appeals

There can be no better introduction to this case than that of the First Circuit:

As society matures and employment law evolves, legislatures have lavished more attention on the policies and practices used by employers with respect to customer gratuities. Massachusetts is in the regulatory forefront on these cutting-edge issues. In the matter at hand, the district court, applying Massachusetts law in a class-action diversity case, concluded that the most recent version of the [Massachusetts] Tips Act says what it means and means what it says. Consequently, the court ruled that the defendant’s policy regarding pooled gratuities violated the Act, certified a class, and awarded damages in an amount exceeding $14,000,000. After careful consideration of a fundamental (and previously unanswered) interpretative question, we hold that the plain language of the Tips Act prohibits the defendant’s tip-pooling policy.

Starbucks operates approximately 150 outlets in Massachusetts. Starbucks euphemistically describes the employees who staff its shops as “partners.” Within that designation, however, employees are divided into four subcategories: store managers, assistant managers, shift supervisors, and baristas. Both shift supervisors and baristas are hourly wage employees, often working part-time. There are both similarities and differences between these two classifications: baristas are front-line employees who serve food and beverages to customers; shift supervisors perform those functions and other functions as well. The classifications are hierarchical, and shift supervisors are usually promoted from the ranks of baristas. Pursuant to company policy, Starbucks’ stores maintain tips containers in which customers may deposit tips. These containers are normally positioned alongside the store’s cash registers. The accumulated tips are distributed weekly to baristas and shift supervisors within a store in proportion to the number of hours worked that week by each individual. The plaintiffs in this case are former Starbucks baristas. They filed this class action suit asserting that Starbucks’ policy violated the Tips Act because it allowed shift supervisors to share in the pooled gratuities. The Tips Act contains specific provisions applicable to the restaurant industry. It provides in pertinent part that “wait staff” employees shall not be required to share tips with anyone who is not a “wait staff employee.” The Act defines a “wait staff employee” as:

“a person, including a waiter, waitress, bus person, and counter staff, who: (1) serves beverages or prepared food directly to patrons, or who clears patrons’ tables; (2) works in a restaurant, banquet facility, or other place where prepared food or beverages are served; and (3) who has no managerial responsibility.

Granting summary judgment for the plaintiffs, the trial court held that under the plain language of the statute, shift supervisors were not eligible for tip sharing. In an opinion with literary flair and well worth reading in its entirety, the First Circuit affirmed, concluding that: “The plain language of the Act, the legislative purpose underlying it, and the Attorney General’s interpretive guidance coalesce to counsel in favor of the conclusion that Starbucks’ Massachusetts-based shift supervisors are not “wait staff” within the meaning of the Tips Act. The evidence, even when viewed in the light most favorable to Starbucks, admits of no other plausible conclusion. Since shift supervisors are not “wait staff,” the district court did not err in holding them ineligible to share in tips pools with baristas.” Read the case: Matamoros v. Starbucks Corp. The First Circuit Court of Appeals’ jurisdiction includes Maine, Massachusetts, New Hampshire, Puerto Rico and Rhode Island.

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