Starbucks Tips and More on Stop and Frisk - U.S. Second Circuit
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Starbucks Tips and More on Stop and Frisk

Who knew that those, now ubiquitous, tip jars everywhere in coffee shops could become a federal case? Well they did (on two occasions, but we'll get to that later). Last Thursday, the Second Circuit, in a brief five-page opinion, affirmed a district court's grant of summary judgment to Starbucks.

Background

Starbucks employees ("baristas") brought a putative class action against Starbucks claiming that Starbucks' policy of tip sharing with shift supervisors violated New York labor law. The district court ruled as a matter of law, that Starbucks did not violate the labor law, and dismissed the baristas' claim. On appeal, since the matter involved the interpretation of New York law, the Second Circuit reserved judgment, and certified two questions to the New York Court of Appeals.

Certified Questions

New York Labor Law § 196-d states in large part: "No employer or his agent ... or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee ..." The questions certified to the Court of Appeals were, in summary, what is an employee (as opposed to an "agent" or manager) under the law; and if, under New York law, an otherwise eligible employee could be prohibited from receiving tips from the pool. In its review, the Court of Appeals stated, "we cannot agree with [the baristas'] contention that even the slightest degree of supervisory responsibility automatically disqualifies an employee from sharing in tips under Labor Law § 196-d.
Principal and Supervisory Responsibilities

Based on the Court of Appeals' review of the law, the Second Circuit applied the factors laid out by the New York Court. Factors indicating "meaningful or significant authority or control over subordinates" included: the ability to discipline, hire, fire, create work schedules, and assist in performance evaluations. The court noted that shift supervisors' primary responsibility was the same as baristas' -- customer service to Starbucks patrons. Though shift supervisors had the ability to schedule breaks and coach baristas, the court stated that "no factfinder could conclude that shift supervisors have such a 'substantial' degree of 'managerial responsibility' that they are no longer akin to 'general wait staff' under § 196-d."

Circuit Split a No-No

Starbucks (or labor law) aficionados may remember that the First Circuit decided, and came to the opposite conclusion last November. But, we wouldn't go so far as to call it a circuit split. Because the courts were examining differently worded state laws, we don't have a circuit split. The Massachusetts law in question explicitly said "no" and the First Circuit held that "no means no."

Stop and Frisk Decision Stands

On Friday, the Second Circuit denied New York City's motion to vacate Judge Scheindlin's stop and frisk opinion, without prejudice, so they may raise issues on appeal. But all that may be for naught, as Mayor-elect Bill de Blasio has already stated that he would drop the City's appeal when he takes office in January. Since the appeal schedule extends into March, 2014, we'll be surprised if this case goes any further.

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