Court Challenges Of Tipping Practices May Affect Many Industries
Employers in a variety of industries where employees receive tips
should expect court challenges to their tip practices in the wake of
several recent high-profile rulings, caution attorneys from Jackson
Lewis LLP, one of the country’s largest workplace law firms.
A
California Superior Court judge recently awarded $105 million against
Starbucks Corporation for unlawfully allowing shift supervisors to
share in a portion of tips left in tip jars for baristas. A
Massachusetts verdict against American Airlines earlier this week
awarded $325,000 in lost tips to skycaps. Employers of workers ranging
from hotel housekeepers, bell persons and door persons to casino
workers to restaurant servers and others should review their tip plans
with counsel as Jackson Lewis attorneys anticipate tip challenges may
form another wave in the wage-hour class action tsunami that has hit
the nation.
"This is not just a California issue; the entire
tipping industry might soon be affected. As tip pooling lawsuits
continue to grow in number across the country and employers
subsequently have to shell out millions of dollars, the practice could
become a thing of the past," said Paul DeCamp, former Administrator of
the U.S. Department of Labor's Wage and Hour Division and current
co-chair of Jackson Lewis' Wage and Hour Practice Group.
DeCamp
adds, "What makes the Starbucks decision difficult for employers in
this industry is that shift supervisors commonly function in different
roles at different times."
The Starbucks lawsuit focused on an
interpretation of California’s Labor Code regarding the payment of tips
to employees and the practice of tip pooling. Labor Code Section 351
provides, "No employer or agent shall collect, take or receive any
gratuity or a part thereof that is paid, given to or left for an
employee by a patron," and Labor Code Section 350 defines "agent" as
"every person other than the employer having the authority to hire or
discharge any employee or supervise, direct or control the acts of
employees."
While Starbucks shift supervisors were paid more per
hour than baristas, they shared customer service responsibilities such
as making coffee, working the register and serving customers. In
addition, shift supervisors were responsible for scheduling workers and
directing work flow – based on these additional responsibilities, the
court ruled that the shift supervisors were "agents" and thus not
entitled to share in the tips.
DeCamp cautioned that "applying
Section 351 to bar participation in tip pools for non-exempt hourly
workers who spend most of their time doing the same tip-generating
tasks as their co-workers is bad law and terrible public policy. Let's
not forget who these shift supervisors really are – hourly workers who
spend nearly all of their time making coffee and devote a few minutes a
week to writing up schedules."
Similar lawsuits against Starbucks by former employees have since been filed in New York, Massachusetts and Minnesota.
A
Massachusetts jury awarded more than $325,000 to nine American Airlines
skycaps who claimed they had been denied tips after the airline began
charging $2 for curbside check-ins in a verdict rendered April 7, 2008.
The plaintiffs in Di Fiore, et al. v. American Airlines, Inc., Case No.
07-10070 in the U.S. District Court for Massachusetts, contended among
other things that the surcharge violated Massachusetts tips law.
Attorneys for those plaintiffs have said they plan to file a similar
action against U.S. Airways in Pennsylvania on behalf of 3,000 skycaps
across the nation.
"It is essential that all employers who use
tip pooling work their way through their state's wage-hour law
regulations to identify where they may be vulnerable," urges Rob
Pattison, Managing Partner of Jackson Lewis' San Francisco office.
"Jackson Lewis can assist companies across the country in these
self-audits."
Jackson Lewis attorneys will be monitoring the
progress of the California Starbucks case on appeal as well as the
progress of other tip and tip pooling cases. Jackson Lewis attorneys
also are available to answer inquiries about achieving wage hour
compliance in California and nationwide. For more information on Chou
v. Starbucks Corp. or the Wage and Hour Practice Group at Jackson
Lewis, please click here.
Founded in 1958, Jackson Lewis LLP
is dedicated to representing management exclusively in workplace law.
With offices in 34 cities and more than 470 attorneys, Jackson Lewis
has developed a concentrated expertise in over 17 specialized practice
areas of the law. Additional information about Jackson Lewis LLP can be
found at www.jacksonlewis.com.