In Matamoros v. Starbucks Corporation, the First Circuit interpreted two key Massachusetts wage and hour statutes, Massachusetts General Laws ch. 149, § 152A (Tip Statute), which regulates gratuities, service charges, and tip pools, and ch. 149, § 150, which provides for mandatory treble damages for wage violations.
The plaintiffs in Matamoros are baristas who claim that Starbucks violated the Tip Statute by allowing shift supervisors to receive a share of tips left by customers in tip jars at the store's registers. Under the Tip Statute, only wait staff and certain other employees who have "no managerial responsibility" are permitted to share in tip pools.
The District Court held that although shift supervisors spend the majority of their time serving customers, they possess managerial responsibility for purposes of the Tip Statute because they also direct employees to workstations, open and close the store, open the store's safe, and handle and account for cash. The First Circuit affirmed, rejecting Starbucks's attempt to distinguish the shift supervisors' relatively minor supervisory duties from "management" and holding that even extraordinarily limited managerial responsibility prevents an employee from participating in a tip pool. The First Circuit based its decision on the language of the Tip Statute, stating: "'No' means 'no,' and we interpret that easily understood word in its ordinary sense: 'not any.'"
Most importantly for Massachusetts employers in general, the First Circuit upheld the mandatory treble damages provision. Prior to 2008, the Massachusetts Supreme Judicial Court (SJC) held that treble damages are punitive in nature and could only be assessed for wage violations if the employer's actions were "outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others." The legislature subsequently amended the statute, making treble damages mandatory and labeling them "liquidated damages." Starbucks argued that mandatory treble damages violated due process. The First Circuit held that treble damages do not create the kind of due process concerns that are implicated by jury-awarded punitive damages. The Court stated that the legislature had characterized the damages as liquidated damages, which are not punitive in nature.
The First Circuit's decision is a blow to Massachusetts employers. There are no exceptions to the Massachusetts treble damages provision and thus it creates the potential for massive liability for even minor and unintentional wage payment errors. However, the First Circuit's decision may not be the end of the story. First, Starbucks may seek rehearing or Supreme Court review. Second, since the First Circuit based its decision solely on federal constitutional law, employers may still be able to attempt to invalidate the provision based on state due process principles, particularly in light of the SJC's decision that the pre-2008 treble damages was punitive in nature. Regardless, employers need to be vigilant about ensuring compliance with Massachusetts' wage and hour laws and correcting any unintentional errors as soon as possible.