Starbucks Ordered To Pay More Than $100 Million In Back Tips

SAN DIEGO — A Superior Court judge on Thursday ordered Starbucks Corp. to pay its California baristas more than $100 million in back tips and interest that the coffee chain paid to shift supervisors.

San Diego Superior Court Judge Patricia Cowett also issued an injunction that prevents Starbucks' shift supervisors from sharing in future tips, saying state law prohibits managers and supervisors from sharing in employee gratuities.

Starbucks spokeswoman Valerie O'Neil said the company planned an immediate appeal of the ruling, calling it "fundamentally unfair and beyond all common sense and reason."

The lawsuit was filed in October 2004 by Jou Chou, a former Starbucks barista in La Jolla, who complained shift supervisors were sharing in employee tips.

The lawsuit gained ground in 2006 when it was granted class-action status, allowing the suit to go forward for as many as 100,000 former and current baristas in the coffee chain's California stores.

It was not immediately clear how many current and former employees are affected by the ruling.

"I feel vindicated," Chou said in a written statement released by attorneys. "Tips really help those receiving the lowest wages. I think Starbucks should pay shift supervisors higher wages instead of taking money from the tip pool."

California is Starbucks' largest U.S. market, with 2,460 stores as of Jan. 8, the latest count available. The Seattle-based company has more than 11,000 stores nationwide.

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Starbucks employs more than 135,000 baristas in the U.S. The company did not immediately respond to a request for a head count in California.

The judgment comes as Starbucks is struggling to revive its U.S. business, where store traffic has slipped amid a sagging economy, rising energy and dairy costs, and growing competition from cheaper rivals.

The company's stock has slid more than 50 percent since late 2006, when it was trading close to $40 a share. Starbucks shares rose 3 cents to $17.53 Thursday.

Starbucks earned more than $672 million on revenue of $9.4 billion during its 2007 fiscal year, which ended Sept. 30.

The judge ordered Starbucks to pay $87 million in back tips, plus interest of $19 million, bringing the total judgment to about $106 million.

The company said it planned to ask the court to stay the ruling while the appeal is pending.

"The decision today, in our view, represents an extreme example of an abuse of the class-action procedures in California's courts," O'Neil said.

The coffee company also took issue with the brevity of the judge's ruling, which was only four paragraphs, saying she failed to address the unfairness to shift supervisors.

"This case was filed by a single former barista and, despite Starbucks request, the interests of the shift supervisors were not represented in litigation," O'Neil said.

But attorney Laura Ho, who tried the baristas case, said the court's verdict follows state law.

"Starbucks illegally took a huge amount of money from the tip pool to pay shift supervisors, rather than paying them out of its own pocket. The court's verdict rightfully restores that money to the baristas," Ho said.

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AP Business Writer Elizabeth M. Gillespie in Seattle contributed to this report.

Comments

[vippy]

Amazing why restaurant employees in the US makes less than everyone else. Talk about being in
a country so backward and it is called the USA and there are people who believe the USA is Number One. I know for sure that the Number One applies to being totally out of the loop and having no clue
about the rest of the world - in other words "brainwashed." Meals are expensive enough when one
goes out to eat so why can't the staff make acceptable living wages?

[falco]

I don't understand why anyone should tip at all at Starbucks. It is not a restaurant. I see no difference between a worker at Kinkos and a worker at Starbucks. Place an order at the counter and then recieve your goods. No hour and a half involvement with mutiple trips in and out of the kitchen, no extensive service to ensure a great dining experience. And the wages at Starbucks are different than for wait staff in a restaurant. I have actually seen where restaurant owners make the waitstaff deduct the credit card percentage for all tips paid on a credit card. American express is the highest. Bottom line - Starbucks is trying to get away with paying low wages to management at baristas and our expense. I can't stand "tip" jars that you see now at pizzarias, donut shops, etc. Maybe department stores will be next. I also loathe the self-serve lines at grocery stores. I have been approached in line to come over to the self-serve, and love it, because it gives me the opportunity to say, very loudly so all can hear "If I thought the money that Mr. Albertson is saving with less staff was passed on to the consumer or to the help in the form of raises and health insurance, I would be happy. But it's not. Find some other sucker."

[abbiehoffmansghost]

Never been to a Starbucks and although I generally tip 20% when I dine out or where tipping is customary I hate tipping. When I went to New Zealand there was no tipping as employees are paid a living wage to start with. I'd like to see tipping go the way of the Republican, I mean Dodo.

[drumz]

This is another example of calling someone a supervisor/manager when all they really are are slightly higher paid employees. The slight amount means they still need tips to survive so it's really all bogus corporate bottom line hugging crap.

[Jason357]

Tips are for the person the customer gives it to. I liked the old days when you just handed the money to the employee and they had their own personal tip jar. To hell with the socialist system of everyone "sharing" regardless of effort.

[alfred]

Hungry lawyers should be jumping all over this.

Example

Colorado has the same laws in limiting the tip pool members.

And there are Starbuck's here in Ski Country USA.

[drjasonmd]

Valerie O'Neil said the company planned an immediate appeal of the ruling, calling it "fundamentally unfair and beyond all common sense and reason that Starbucks should have to comply with legislation passed by the government. It's not like we can afford lawyers to give us advice on our policies before we implement them."

"This case was filed by a single former barista and, despite Starbucks request, the interests of the shift supervisors were not represented in litigation," O'Neil said. "it's not fair that the judge only allowed the jury to consider the law as written. I mean, we're Starbucks! We are the law!"

I guess $670 million in profits isn't enough of a margin to fairly compensate management. Of course, the natural inclination of any responsible corporate citizen would be to shift that cost to the lowest paid employees in the corporation, even if it is against the law.

Support your local (fair trade) coffee shop. At least then you'll have some idea where your money is going. Life's too short to drink corporate coffee.

[lastrefuge]

1) Tips should not be for any service person who makes more than the restaurant minimum for tipped employees. This typically cuts out carry-out service persons who make full wages-whether or not they negotiated a decent by-the-hour or weekly salary. Carry-out servers expecting tips is ridiculous-they're not specialty wait-service, they're prep people. 2) The sole purpose of any extraneous tip is to reward personal initiative and should never be split w/anyone except back-up bus or bar-backs 3) The idea that the employer has any claim on tips or ever touches the pool is outlandish and wrong headed. They should screw these low-lifes to the wall.

[shag11]

Greedy bastards. Management is supposed to be compensated well, tips are for the ground level employees. Shame on them.

[venicesurfer]

i used to work at starbucks as a supervisor, in fact i recently got a letter about this case and apparently my name is in the case because when it was filed i was just a barista. but....

i think this lawsuit is absolutely ridiculous. i as a supervisor worked hard. making drinks, taking orders, drive thru as well as managing my shift. we deserve tips as well since we do work the register greeting the guests.

assistant managers/managers are the ones that arent usually on the floor.

i hope starbucks wins the appeal.

[vandegrasse]

I think my tipping at Starbucks days are over because I won't be frequenting there. Save a lot of money.

[pc51]

I say close all Starbucks in the US and take them overseas where business is understood and appreciated. Let the 100,000+ employees try to find jobs elsewhere in the US, if there are even any left anymore, where they can then sue for some other stupid reason until lazy, greedy American labor drives all business out of the US. Then they can dig up root vegtables to eat and fight each other for firewood.

[SCG]

That's one "Grande" tip jar!

[WIpatriot]

deici.

[AMERIKA]

As a daily Sbucks user, I see the whole crew working hard behind the counter...in fact the "shift supervisor" in the store I frequent is always hardest working dude behind the counter, on the floor, pulling coffee and generally being as efficient and as kind and cheerful as he can be. In fact the only reason I tip at all is because of him. The sleepy barista behind the espresso machine never makes eye contact, never smiles and is largely anonymous. The shift super on the other hand deserves to share in the tips since in truth, he earns it.

[vandegrasse]

The shift manager should be paid a decent salary commensurate with his position. In reality, we, with out tips, are paying the higher salary the company should be giving him for his extra efforts. Starbucks is just one of many greedy American companies who have worked out a quasi-criminal scheme for the customers to make up with tips and therefore, double-pay them, so that they can improve their own bottom line. It's a lose-lose situation for everyone except Starbucks. So why go there and contribute to this criminality? Think about this next time you want coffee. Get a good coffee machine, make it at home and assure you, you'll be the better for it.

[venicesurfer]

thank you. i agree. i used to be a supervisor. we bring in tips while working the register, making drinks, managing the shift etc.... no reason why we shouldnt get tips.

although i do benefit myself from this lawsuit since i was a barista at the time it was granted class action status.

[WilliePilgrim]

Hmmm. Seems like what is identified as success in a culture that values quantity over quality...cool trick Starbucks has, fooling us into into thinking they could bait and switch like that. I am disappointed in their ruthlessness and in the managers' greed, but who could be surprised?
Hovever, what is really terrible, in my opinion is that income from tips is taxed by the IRS. Another level of invasion into our lives and what we do with our money. If you're not big enough to hire a staff of accountants you shouldn't be strapped with the need to defend yourself from the government with its equivalent. Why hobble ourselves with pointless perfunctuary levels of regulation? Remove these beaurocratic hurdles and operations like starbucks could never in a million years compete against local and deserving small business that would add a level of community involvement and awareness the faceless franchises could never achieve...now that would be fairness in action.

[gwshrub]

Actually, you do not have a clue about Starbucks. These "managers" you are talking about are "shift leaders." These are nothing more than regular Baristas who have worked there long enough to be trusted with handling things that come up and making sure the deposits are made (in addition to continuing to function as a Barista). In exchange for this extra responsibility they earn a little (emphasis on little) more per hour (yes, they are still hourly employees) than they did as a regular Barista.

Starbucks gets a bad corporate rap in main stream media. My son worked for Starbucks for many years, and I can tell you that they are without doubt the most employee friendly place around. They provide low cost (emphasis on low) insurance for all employees working 15 hours or more per week. They have education assistance programs, stock options, and a kind and generous paid bereavement leave program - and these benefits are for the hourly employees. Frankly, it is well (emphasis on well) worth the extra few cents for a cup of coffee just to know that these employees have an excellent insuracne program easily available to them.