Big Suits: Chau v. Starbucks

The American Lawyer, June 2008

By Claire Duffett

One hundred five million dollars: That's a lot of lattes. Some 120,000 current and former Starbucks Corporation' baristas in the Golden State obtained the largest wages restitution award in California history March 20. Ruling that Starbucks violated a state labor law when it allowed shift supervisors to share in tip pools, a state labor law when it allowed shift supervisors to share in tip pools, a state judge ordered the coffee retailer to repay more than $86million in tips, plus about $19 million in interest to the class, or an average of $875 per employee.

In September 2004 Starbucks' barista and college student Jou Chau sought counsel because he believed that his employer was distributing tips unfairly. A month later, his lawyer filed a class action in state court in San Diego on behalf of current and former baristas at California's more than 1,600 Starbucks outlets. The action drew upon a California law that prohibits requiring employees to share tips with those who supervise, direct, or control the acts of employees.

In April 2006 San Diego state court judge Patricia Cowett certified the class. Attorneys for the baristas sent out notifications to California baristas employed after October 2000.

The liability phase of the bifurcated trial began February 19. At issue was whether shift supervisors were prohibited from receiving tips under the state labor code. Lawyers for the baristas asserted that shift supervisors actually managed employees. Attorneys for Starbucks countered that shift supervisors were simply senior baristas who organized shift schedules but possessed no authority. On February 28 Cowett ruled that the company was liable for the lost tips.

The remedies phase began March 12. Expert statisticians and forensics accountants for the barista class drew on Starbucks' payroll and tip records to estimate what the baristas hourly tip rate should have been. Their award includes restitution plus interest.

Starbucks' lawyers say the company plans to appeal. Starbucks' baristas have filed similar lawsuits based on state statues in Massachusetts, Minnesota, and New York.