Starbucks Told to Pay $100M for Tip-pooling

The San Francisco Daily Journal, Friday, March 21, 2008, Vol. 114 No. 54

Source: Pat Broderick, Daily Journal Staff Writer

SAN DIEGO - Should coffee jockeys have to share tips with their bosses?

San Diego Superior Court Judge Patricia Yim Cowett last month said no and on Thursday ordered Seattle-based Starbucks to repay its baristas $105 million in tip pool money that the international coffee seller used to pay its shift supervisors.

In February, Cowett ruled that Starbucks' practice of paying shift supervisors from the tip pool violated California law because they direct the work of baristas, Chou v. Starbucks Corp., GIC 836925.

Cowett's ruling Thursday, after a weeklong bench trial on damages, covers 100,000 current and former baristas who worked for Starbucks in California from Oct. 2000, through the date of the trial. An earlier liability phase in February lasted less than two weeks.

"It was a good victory for the for the baristas," said lead trial attorney for the plaintiffs, David A. Lowe, of the law offices of Rudy, Exelrod & Zieff in San Francisco.

The legal counsel for Starbucks was not immediately available for comment. A spokesman for the company called the ruling fundamentally unfair and said Starbucks would appeal. The verdict comes in the wake of a tough financial stretch for Starbucks, whose stock has lost half its value in the last 15 months.

Although the case involves California law, Lowe said he expects it to have a wide impact.

"I hope that it sends a message to employers that they can't just be cavalier in thinking that because they are a large corporation they don't have to follow the requirements of the labor code, which is meant to protect the lowest-level workers in the service industry," he said.

"It is totally improper for a company to subsidize their labor costs by taking tip money out of the jar."

Jou Chau, a plaintiff and a college student who worked as a barista from 2003 to 2004, said he felt vindicated.

"Tips really help those receiving the lowest wages," he said. "I think Starbucks should pay shift supervisors higher wages instead of taking money from the tip pool."

Nicole Dorsey, a current Starbucks shift supervisor, commented, "I enjoy working at Starbucks, and I think it's important for Starbucks to follow California law. If that means I can't receive tips from the tip pool with baristas, I'm fine with that decision and am happy to continue working for Starbucks."

A hearing is scheduled on May 1 for post-judgment proceedings.

In addition to Lowe, the baristas' lawyers included Laura L. Ho of Goldstein, Demchak, Baller, Borgen & Dardarian; A. Eric Aguilera of Bohm, Matsen, Kegel & Aguilera; and Terry J. Chapko of the law offices of Terry J. Chapko.

Among the defense counsel was Joel M. Cohn, an attorney with Akin Gump Strauss Hauer & Feld in Washington, D.C. Other defense counsel were Catherine A. Conway and Gregory W. Knopp of Akin Gump Strauss Hauer & Feld in Los Angeles.