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Starbucks wins reversal of $100-million tips verdict

Supervisors 'essentially perform the same job as baristas,' so they may receive a share of tips, the California Court of Appeals in San Diego rules.

June 03, 2009|Andrea Chang and Jerry Hirsch

The tempest in a tip jar tipped back in favor of Starbucks Corp. on Tuesday when a California appeals court reversed a ruling that had ordered the coffee giant to pay more than $100 million in restitution for allowing shift supervisors to share baristas' tips.

The class-action lawsuit was brought on behalf of more than 100,000 current and former baristas in 2004 by former barista Jou Chau, who complained that shift supervisors were illegally getting a cut of employee tips.

San Diego County Superior Court Judge Patricia Cowett ruled in favor of the baristas last year after a bench trial and awarded $86 million in restitution plus about $20 million in interest. Starbucks called the decision "fundamentally unfair and beyond all common sense and reason."

An appeals court reversed the ruling Tuesday, saying that the original decision was improperly based and that supervisors at the nation's largest coffeehouse chain "essentially perform the same job as baristas."

"We conclude the trial court erred in ruling that Starbucks' tip allocation policy violated California law," the state Court of Appeals in San Diego said in the decision. "The applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes."

Attorneys for the baristas said they planned to appeal the decision to the California Supreme Court.

"Up to this point, every court that has addressed this issue has found that an employer cannot pay supervisors from a tip pool. This is the first case that goes in a different direction," said David Lowe, a lawyer for the baristas. "We will be looking to the California Supreme Court to fix this error."

Lowe, of San Francisco law firm Rudy, Exelrod, Zieff & Lowe, said Section 351 of the state labor code states that an employer or agent can't take or receive any part of tips left for employees. The legal definition of an agent, he said, is anyone who has authority to supervise, direct or control workers.

But Starbucks argued that its supervisors spend most of their workdays -- as much as 95% -- performing the same jobs as baristas, including making coffee and taking orders. Although supervisors have some authority to supervise or direct baristas, they can't enforce those directions and can't hire, discipline or terminate them, the Seattle company said.

At the Starbucks on Crenshaw Boulevard and Coliseum Street in Los Angeles, baristas and shift supervisors work side by side to serve customers, said supervisor Tameko Aubry, who worked as a barista for five years.

"We do the same thing the baristas do," Aubry, 27, said. "That's why we supervisors think we should get tips too. . . . If they took the tips away, I would have to work extra hours or get another job."

On average, she said, supervisors make about $3 more an hour than baristas do.

Shares of Starbucks fell 10 cents, or less than 1%, to $14.82 on Tuesday. The company released a statement saying it was "very pleased with the Court of Appeal's ruling. It validates our long-standing tip policy."

Money collected in tip jars is put into safes at each Starbucks and apportioned weekly to eligible employees based on the number of hours they work. Last year, Cowett said, the average tip distributed to baristas and supervisors was $1.71 an hour.

Although allowing supervisors to receive tips cuts into her income, Wendy Canizales, a barista at a Starbucks in Little Tokyo, said she understood the company's policy.

"In some ways, I think it's a little unfair because they make more than us," she said. "But they do work more than we do and have more to take care of."

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andrea.chang@latimes.com

jerry.hirsch@latimes.com

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