A California appeals court reversed a $105 million class action verdict against Starbucks Tuesday, in a dispute over tip-sharing at the coffee retailer.
Jou Chau, a former barista at Starbucks, sued in 2004, alleging the companywide tip-sharing policy violated California law because it included shift supervisors in tip pools. State law regulating tips aims to prevent company owners or managerial employees from taking tips away from the people engaged in customer service.
In March 2008, a California Superior Court judge ordered Starbucks to pay 120,000 former baristas $105 million in withheld tips and interest.
But on appeal California Fourth District Court of Appeal reversed the decision, saying the shift supervisors are not actually managers. They are more akin to baristas, the court said, because they perform the same tasks, including making coffee and running cash registers, in addition to some supervisory duties. Moreover, shift supervisors are also part-time employees like baristas
"There is no decisional or statutory authority prohibiting an employer from allowing a service employee to keep a portion of the collective tip, in proportion to the amount of hours worked, merely because the employee also has limited supervisory duties," wrote Judge Judith Haller.
(Read more in-depth analysis of Chau v. Starbucks and its implications.)