Starbucks steamed over $105 million verdict on tips — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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Starbucks steamed over $105 million verdict on tips

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in Leaders & Managers,Management Training

A California Superior Court judge has ordered coffee giant Starbucks to pay its baristas $100 million in lost tips resulting from the company’s tip jar policy. Additionally, the court issued an injunction barring shift supervisors and managers from receiving tips.

The situation has been brewing since October 2004, when one disgruntled barista filed a complaint arguing that management personnel weren’t entitled to tips under California state law. It eventually became a class action.

California Superior Court Judge Patricia Cowett ordered Starbucks to pay to its employees $86,687,926 worth of tips shared with shift supervisors and “shift leads.”

The court also awarded them 7% in “awards interest.” She also approved an injunction barring Starbucks from continuing to use its tip policy. The class action was brought on behalf of all California baristas employed by Starbucks back to 2000—an estimated 100,000 workers.

Almost before the ink was dry on the order, Starbucks CEO Howard Schultz sent a voice mail to all employees. Schultz said, “The ruling would take away the right of shift supervisors to receive the tips they earn for providing superior customer service. I want you to know that we strongly believe that this ruling is extremely unfair and beyond reason.”

Starbucks pledged to appeal the ruling. Meanwhile, lawyers are busy filing class-action lawsuits on the same question in other states.

Final note: Tips may seem like a small thing, but those pennies and quarters quickly add up. So does your liability if you don’t follow the law on distributing those funds.

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