In a refreshingly practical decision, the California Court of Appeal reversed a tip-sharing verdict against Starbucks, erasing an $86 million dollar judgment. In Chau v. Starbucks Corporation, the Court of Appeal held that California law did not prohibit Starbucks from allowing a service employee to keep a portion of a collective tip, in proportion to the amount of hours worked, merely because the employee also had limited supervisory duties.


Discussion

Jou Chau, a former Starbu cks barista, brought a class action against Starbucks, alleging that its policy of allowing part-time hourly shift supervisors to share in tips left in a collective tip jar by customers, violated California law.

The trial court found in favor of Chau, and held that the shift supervisors were agents of the employer under the Labor Code, and therefore were prohibited from sharing the tips.

In yesterday's decision, the Court of Appeal reversed the trial court, finding that the Labor Code does not prohibit an employer from permitting shift supervisors to share in tip proceeds placed in collective tip containers by customers for the services provided by a team of employees. Notably, the Court did not reach the question of whether the shift supervisors were "agents" of the employer within the meaning of the Labor Code. Rather, the Court simply held that shift supervisors could share in collective tips left for se rvices provided by a group of employees that included both baristas and shift supervisors.


What This Means

This decision is good news for employers, who like Starbucks, allow tips to be shared by a team of service employees.

Employers, however, should be cautioned regarding the narrow scope of the Court's holding. Yesterday's decision does not overturn the Labor Code prohibition on forcing an employee to share a tip given by a customer to that particular employee for that employee's individual service. Further, Chau's attorneys have already announced that they will seek review of this decision by the California Supreme Court, so this decision may not be the last word.

This case is yet another illustration of creative plaintiff attorneys using the California Labor Code as a vehicle to launch big dollar class action lawsuits against employers. Fortunately, common sens e prevailed in this case.