The U.S. District Court for the District of Massachusetts recently adopted a pair of reports by a federal magistrate judge, finding that Starbucks violated Massachusetts law by allowing shift supervisors to share in the proceeds of “tip jars” and recommending certification of a class of Massachusetts baristas affected by the practice.

The plaintiffs in Matamoros v. Starbucks Corporation alleged that the coffee shop chain violated Massachusetts General Laws ch. 149, § 152A (Tip Statute) by allowing shift supervisors to receive a share of the money deposited by customers in countertop jars located at the chain’s cash registers. Under the Tip Statute, only wait staff and other employees who have “no managerial responsibility” are permitted to share in tip pools. In early February, Magistrate Judge Leo Sorokin determined that although Starbucks shift supervisors spend a majority of their time serving customers, they possess managerial responsibility for purposes of the statute because they also perform duties such as directing employees to workstations, opening and closing the store, opening the store’s safe, and handling and accounting for cash.

Magistrate Sorokin also rejected Starbucks’s argument that cash deposited in the jars is not a “tip” for purposes of the Tip Statute because it is intended to reward service performed by the shift supervisors, and thus is not “given as an acknowledgment of service performed” by non-managerial employees, as required by the statute. The magistrate determined that money placed in the jars is meant to reward service by the entire Starbucks team, including non-managerial employees, and therefore meets the statutory definition.

In a separate report issued the same day, the magistrate also recommended that the District Court certify a class of current and former Massachusetts baristas, finding that common issues predominated in the case because the plaintiffs challenged “a uniform policy of the Defendant under a specific state statute.” In addition, the magistrate found that no conflict existed between baristas who had been promoted to shift supervisor positions and the rest of the class. The magistrate reasoned that although some current shift supervisors wanted the established tip sharing practices to remain in place, their preference was moot if the practice was not permissible under the Tip Statute. The magistrate also noted that a relatively small number of employees opposed the lawsuit, and those individuals maintained the ability to opt out of the class.

Under federal procedural rules, the magistrate’s recommendations did not become final until adopted by the District Court. In adopting the magistrate’s recommendations in their entirety, District Court Judge Nathaniel Gorton called them “thorough and well-reasoned.”

This decision is one of only a handful that attempt to construe the Tip Statute, nearly all of which have interpreted it in a restrictive manner. To avoid liability under the statute, employers must be careful not to permit employees with even minor supervisory duties to participate in a tip pool.