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Court of Appeal Reverses $86 Million
Verdict Against Starbucks
June 3, 2009
Summary
Yesterday, 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 Starbucks 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 services
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 sense prevailed in this case.
This E-Update was authored by
Rod Betts,
Timothy Keegan,
and
Brenda
Kasper. For more information, or questions, please contact
Mr. Betts, Mr. Keegan,
Ms. Kasper or any Paul, Plevin attorney at (619)
237-5200.
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