Answering two of the questions certified to it by the Second Circuit Court of Appeals, New York’s high court has determined that Starbucks Corp. can, under the state’s Labor Law, distinguish among its employees for purposes of sharing the tips customers leave in a jar on the counter. Barenboim v. Starbucks Corp., Winans v. Starbucks Corp., No. 122 (N.Y., decided June 26, 2013).

Starbucks’ policy requires the distribution of pooled tips to baristas and shift supervisors. Both classes of employees spend most of their time performing customer-oriented services, such as taking orders, making and serving beverages and food, operating the cash register, cleaning tables, and stocking products. Both also work part-time and are paid hourly. Shift supervisors have minor supervisory responsibilities.

Starbucks does not allow assistant store managers or store managers to receive any of the pooled tips. Both classes work full-time and are eligible for bonuses and benefits, such as holiday and sick pay. While assistant store managers spend the majority of their time performing customer-oriented services, “they also possess greater managerial and supervisory authority than shift supervisors.” Store managers are responsible for overall store operations.

One lawsuit before the Second Circuit was filed by baristas who claimed that shift supervisors, as “agents,” should not be allowed to share tips. The other lawsuit was filed by assistant store managers who claimed that they should be entitled to participate in the tip pools because they are not ineligible as “agents” under the Labor Law. The federal district courts in both cases granted Starbucks’ motion for summary judgment.

The New York court decided to address the question “What factors determine whether an employee is eligible or ineligible to receive distributions from an employer-mandated tip-splitting arrangement?” Relying on state Department of Labor pronouncements on the issue, the court agreed that an employee’s ability to participate in a tip pool must be based on duties and not titles. Thus “employees who regularly provide direct services to patrons remain tip-pool eligible even if they exercise a limited degree of supervisory responsibility.”

Still, in response to the claims of assistant store managers that they remained eligible to share tips because they do not have full or final authority to terminate subordinates, the court said, “there comes a point at which the degree of managerial responsibility becomes so substantial that the individual can no longer fairly be characterized as an employee similar to general wait staff.” The court concluded that “the line should be drawn at meaningful or significant authority or control over subordinates.” The court left it to the federal courts to apply these principles to the cases.

As to a second certified question, that is, “whether an employer may deny tip pool distributions to an employee who is nevertheless eligible to split tips under Labor Law § 196-d,” the court agreed with the federal district court that the law “excludes certain people from an employer-mandated tip pool but does not require the inclusion of all employees not statutorily barred from participation” while leaving “open the possibility that there may be an outer limit to an employer’s ability to excise certain classifications of employees from a tip pool.” According to the court, Starbucks’ decision to exclude assistant store managers from the tip pool is not contrary to the Labor Law.