Starbucks Told to Pay $100M for Tip-pooling

The Recorder, Friday, March 21, 2008

Source: Matthew Hirsch, Recorder Staff Writer

SAN FRANCISCO- Starbucks baristas, you've got mail.

In a two-page letter to counsel, San Diego Superior Court Judge Patricia Cowett said the Seattle-based coffee company must pay baristas $86 million, plus interest, for using some of its employees' tips to pay shift supervisors.

A plaintiff attorney in the case said the total judgment will exceed $100 million.

Cowett's Thursday ruling follows on her finding last month that the company was liable for sharing tips with managers such as shift supervisors. California's tip-pooling law says that gratuities meant for hourly workers can't be taken by an employer or its "agents" - and Cowett found Starbucks supervisors were "agents."

Plaintiffs' attorney David Lowe asked the judge to award restitution and interest to a statewide class of about 120,000 baristas, or coffee servers, employed by the chain's California branches since 2000.

Based on expert testimony, Cowett pegged the average tip rate at $1.71 an hour and multiplied it by the 50,694,694 hours worked by shift supervisors.

Lowe, a partner at San Francisco's Rudy, Exelrod & Zieff, said the judge's calculation was a "very defensible, very practical way to go about it."

Cowett's letter also said the baristas are entitled to an injunction based on "uncontroverted testimony that Starbucks continues to utilize the distribution of tips from the tip pool to compensate shift supervisors as well as baristas."

Starbucks was represented by Akin Gump Strauss Hauer & Feld partners Daniel Nash and Joel Cohn, in Washington, D.C. The firm referred questions to Starbucks.

In an e-mail, Valerie O'Neil, Starbucks' director of global communication, said Cowett's ruling is "not only contrary to law, it is fundamentally unfair and beyond all common sense and reason."

"Starbucks believes that our shift supervisors deserve their fair share of the tips that they receive from the tip jars in our California stores," O'Neil said.

She said Starbucks plans to "vigorously" appeal the decision.

Lowe, of course, disagreed.

"Starbucks has lots of other ways it can compensate shift supervisors but the money has to come from Starbucks, not from the [tip] pool," he said. "Nobody's looking to take money from the shift supervisors."

Cowett asked each side to propose a method for distributing the money to class members by April 29.

The case is Chou v. Starbucks, GIC 836925.