California court rules that Starbucks must pay $105m in tips dispute

30th March 2008

The judge in a long-running law suit filed on behalf of 100,000 Starbucks baristas in late March ruled that the Seattle-based roaster / retail chain would have to pay $105m in penalties, because of its policy of allowing shift supervisors to share in staff tips.

Under California law, while tips may be pooled, supervisors, managers or owners are not permitted to share them with other employees.

The suit, initiated in 2004, involves Starbucks staff from about 1,400 outlets.

Judge Patricia Cowett calculated therefore that Starbucks had given $87m to its supervisors, and added interest to reach $105m, according to a Bloomberg report.

In a statement, Starbucks said that its hourly shift supervisors were not managers and had no managerial authority. Both baristas and shift supervisors provided the same service, the company added, and customers did not differentiate between them. Store managers and assistant manager, who do have managerial functions, do not share in the customers’ tips.

Starbucks, which is to appeal the ruling, added that the decision was “not only contrary to the law, but also fundamentally unfair and beyond all common sense and reason.”