Court Holds That Starbucks Complied With Tip-Sharing Statute

In Winans v. Starbucks, 796 F. Supp. 2d 515 (SDNY July 11, 2011), the Southern District of New York dismissed a complaint alleging that Starbucks improperly retained gratuities that plaintiffs were entitled to receive.

Plaintiffs, several Starbucks “assistant store managers”, sued their employer for violating New York Labor Law 196-d.  The Court ruled in Starbucks’ favor, finding that the company complied with the statute’s provisions.  (I am actually sitting in a Starbucks as I write this.)

Labor Law 196-d prohibits an “employer or his agent … or any other person” from “demand[ing] or accept[ing] … any part of the gratuities received by an employee, or retain[ing] any part of the gratuity or of any charge purported to be a gratuity for an employee.”  While it prohibits employers or their agents from participating in their subordinates’ tip pools, it neither “bar[s] employers from mandating that tip-eligible employees participate in tip pools” nor “impose[s] any requirement that an employer provide a tip-inclusive compensation structure for all employes who would be statutorily eligible to participate in a tip pool.”

The court found material issues of fact regarding the plaintiff-employees’ eligibility to participate in tip pooling, yet granted Starbucks summary judgment because plaintiffs could not prove, even assuming they were eligible, that they had a right to participate in tip box distributions.  Plaintiffs also failed to prove that Starbucks required them to give up tips that were given to them personally.

Under the plain language of Labor Law 196-d, an eligible employee does not necessarily have a right to participate in a tip pool, “nor does the absence of a prohibition effect an entitlement.”

The court also rejected plaintiffs’ argument that they had a right to share in the tips because of “customers’ presumed intent to compensate anyone they observe performing customer service tasks”.   The facts of the NY Court of Appeals case cited by plaintiffs in support of this argument differed from those of the instant case, in which there were “no mandatory service charges to customers, there is no evidence of representations made by Starbucks or anyone else as to the distribution of tip box proceeds and … there is no evidence or allegation that Starbucks retained any of the tip box proceeds for itself.”  In short, Starbucks never retained the tips for itself, but – in accordance with 196-d – permitted tip-eligible customer service employees (and only those employees) to share in the tip proceeds.

Finally, as to tips allegedly placed by customers directly into plaintiffs’ hands, plaintiffs failed to introduce any evidence that Starbucks – either through a policy or otherwise – demanded, accepted or retained these tips.  One plaintiff’s explanation for why he felt he had to place the tips in the collective tip box (he “felt is was the right thing to do”) was plainly insufficient.

Having found that Starbucks complied with 196-d, the court granted summary judgment in its favor.

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