Affirming a $14 million judgment against Starbucks Corporation for violation of Massachusetts’ unique tip law, the U.S. Court of Appeals for the First Circuit has ruled that the employer’s shift supervisors could not participate with baristas in tip pools based on tips left in the ubiquitous counter-top jars. Matamoros v. Starbucks Corp., 2012 U.S. App. LEXIS 23185 (1st Cir. Nov. 9, 2012). The Court found the law’s definition of “wait staff employee” expressly limits participation to individuals who have “no managerial responsibility.” Although the parties did not dispute that shift supervisors perform much of the same service work performed by baristas, because they also direct the baristas’ work, they were out of the tip pool.

Background

Starbucks Corporation operates a national chain of coffee houses, including approximately 150 stores in Massachusetts. It classifies its store employees in one of four categories: store managers, assistant managers, shift supervisors, and baristas. Both shift supervisors and baristas are hourly employees who serve food and beverages to customers. Shift supervisors perform additional tasks, including: opening and closing the store, handling and accounting for cash, and ensuring that baristas take their scheduled breaks. Whenever there is no store manager or assistant manager on duty, the shift supervisor is responsible for deploying baristas to their work stations, opening the store’s safe, and handling cash register tills.

Starbucks’ stores maintain counter-top containers in which customers may deposit tips. Accumulated tips are distributed weekly to baristas and shift supervisors in proportion to the number of hours they worked each week. Herman Matamoros and others, former baristas, sued Starbucks, on behalf of themselves and others, for alleged violations of the Massachusetts’ Tips Act, Mass. Gen. Laws ch. 149, § 152A. The trial court certified a class of Massachusetts baristas and granted summary judgment in favor of Matamoros and the other former baristas. The trial court then awarded $14 million in damages, including treble damages, based on the parties’ stipulations concerning the applicable remedy in the event a violation was found. An appeal followed.

Applicable Law

The current Tips Act limits tip pool participation to individuals employed as “a waiter, waitress, bus person, and counter staff, who: (1) serves beverages or prepared food directly to patrons, or who clears patrons’ tables; (2) works in a restaurant, banquet facility, or other place where prepared food or beverages are served; and (3) who has no managerial responsibility.” 

Under a prior version of the Tips Act, Massachusetts courts applied a “primary duty” test to determine whether an employee was eligible to participate in a tip pool. If an employee’s primary duty was to serve customers, she was eligible to participate. See, e.g., Williamson v. DT Mgmt., Inc., 2004 WL 1050582 (Mass. Super. Ct. Mar. 10, 2004). However, as one Massachusetts court has explained, “in enacting the current Tips Act the Legislature rendered the primary duty analysis moot” because the “Tips Act is unambiguous and does not distinguish between employees who have many managerial responsibilities and those who have few.” Black v. Cranwell Mgmt. Corp., No. 2007-00122, slip op. at 13-4 (Mass. Super. Ct. Oct. 21, 2009).

In addition, the Massachusetts Attorney General, who is charged with enforcing the Tips Act, stated in an advisory guidance, “[w]orkers with limited managerial responsibility, such as shift supervisors . . . do not qualify as wait staff employees.” The advisory further stated that managerial responsibilities encompassed “supervising employees and assigning servers to their posts.”

Share in Tip Pool

Starbucks argued that its shift supervisors should be considered wait staff because they did not have managerial responsibility, but engaged only in limited supervisory tasks. Shift supervisors could not hire, fire, discipline or take other employment actions toward the baristas. The appellate court rejected Starbucks’ “hair-splitting,” finding the law’s provision regarding no managerial responsibility “says what it means and means what it says.” The Court further observed that, by amending the Tips Act to include the “no managerial responsibility” provision, the legislature created a bright-line test and eliminated the “primary duty” analysis that existed prior to the amendment. The Court also deferred to the AG’s advisory. Accordingly, the Court concluded that Starbucks’ shift supervisors were not “wait staff” within the meaning of the Tips Act because they directed the baristas’ work and thus were ineligible to share in a tip pool. The Court affirmed the judgment against Starbucks.

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Matamoros raises concerns for hospitality employers in Massachusetts. They should consider reviewing their tip practices now that it is clear that tip pool participation is greatly constrained by the language of the Tips Act.