Whose Hands Is Starbucks Trying to Keep Out of the Tip Jar?

When you groggily drop a couple of coins into the Starbucks (NASDAQ:SBUX) tip jar before getting your morning caffeine fix, do you ever wonder where that money is going? Does that tip belong to your friendly barista, the man pouring your coffee, or the woman behind him doling out responsibility and filling in when need be? New York’s Court of Appeals is assessing just that.

The state’s top court has been asked to interpret New York’s labor law and its definition of an employer’s agent, who by law is prohibited from sharing the money in the tip jar. The problem arises, though, when one is made to distinguish which employee positions fall under this category, and which do not. At the bottom of the totem poll at Starbucks are low-level baristas, who serve customers and share tips. The next position, the shift supervisor, has limited management responsibilities, serves customers, and also shares tips. Moving toward the top are the assistant managers at the coffee chain who aren’t welcome to gratuities, but want some.

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The Second Circuit U.S. Court of Appeals is in the process of reviewing separate lawsuits filed against Starbucks by baristas and assistant managers. While many of the baristas are opposed to sharing tips with the supervisors who have management responsibilities and receive higher waves, the attorneys representing assistant managers contend that they spend most of their time serving customers and therefore deserve tips. One attorney representing the assistant managers, Adam Klein, explains that they don’t have the authority to hire and fire staff and therefore shouldn’t be considered company agents under the law.

But Starbucks disagrees, believing its assistant managers are not only full-time and salaried, but are also rewarded with bonuses and other benefits not available to those below them, warranting their exclusion from tips. As the coffee house giant struggles to keep assistant managers categorized as “agents,” those contesting the categorization are then asking the New York federal appeals court to assess what determines how employees of a company are classified. Additionally, the court must review if the state law even allows employers, such as Starbucks, to exclude certain tip-earning employees from sharing in a tip pool.

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The state court decision is not expected to affect just Starbucks. The 42,000 New York businesses statewide along with a quarter-million hospitality industry workers in New York City alone will likely feel the decision’s ramifications. Starbucks has 413 company-owned stores in New York and its tip jar policy extends consistently across all its stores in the U.S.

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