Litigation

Employers face litigation over tip policies

By Matt Hedberg

Proper handling of employee tips has emerged as a hot issue in employment litigation.  Last month, a San Diego superior court judge ruled that Starbucks Corp. must pay more than $100 million to  compensate thousands of baristas after allowing supervisors to share in the tip pool.  Chou v. Starbucks Corp., No. GIC836925 (San Diego Co., Calif., Super. Ct.).  In recent weeks, similar suits have been filed against Starbucks in Massachusetts, Minnesota, and New York.  In a federal lawsuit, DiFiore v. American Airlines, that returned a jury verdict earlier this month, nine American skycaps were awarded $325,000 after they alleged a new $2 per baggage fee for curbside check-in-service diminished their tips.  A similar suit against U.S. Airways Group Inc., Mitchell v. US Airways, was filed on April 11.

In the California Starbucks case, a former barista sued Starbucks over the company's policy of pooling tips and sharing them with managers and supervisors.  The case was later certified as a class action.  The plaintiffs' claims included a contention that the policy violates California Labor Code 351, which states no employer or agent can collect tips that customers leave for servers.

In federal court, employees claim that an employer violates the Fair Labor Standards Act if employees who are paid less than minimum wage do not receive enough in tips to make up the difference.  In a case filed against Ruth's Chris Steak House Inc., employees who work for less than minimum wage claim they spend more than 20% of their time folding napkins, cleaning tables and doing other tasks that don't generate tips.

The lesson for employers is clear:  Be alert to how you distribute employee tips.

Full post as published by Northwest Business Litigation Blog on April 29, 2008 (boomark / email).