$86 Million Dollar Award to Starbucks Baristas Reversed on Appeal

July 2009Newsletters California Update - Third Quarter 2009

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Last year, a trial court in San Diego County awarded Starbucks baristas a whopping $86 million in restitution for a Starbucks tip pooling policy that allowed shift supervisors to share in tips left by customers. A California Court of Appeal recently reversed this award, finding that an employer is not prohibited from allowing employees who provide service to the customer to keep a portion of the tip proceeds left in a collective tip box. The appellate court distinguished this situation from those where employers mandate tip sharing when the tip is given to an individual service employee. There were limits placed on the appellate court’s decision, and employers should not jump to conclusion that all managers can now share in employee tips. The opinion, however, provides another positive decision for businesses using tip-pooling policies. It is Chau v. Starbucks Corp., Court of Appeal, Fourth Appellate District, Division One, Case No. D053491 (Cal.App. June 2, 2009).

The California Supreme Court will soon weigh in on the subject of tippooling. It recently granted review in Grodensky v. Artichoke Joe's Casino, Case Number S172237, which involves a class of casino card dealers who claim that the casino's tip pooling practice is unlawful.