The question of which types of employees are considered agents of their employer for purposes of sharing in tip pools has come to the forefront in a number of cases filed against Starbucks. The Starbucks litigation is an excellent reminder to employers that issues concerning the payment of wages, in particular tip pooling, may involve not only the federal labor law (i.e. Fair Labor Standards Act) but may also touch on various state labor laws.

Under federal law, employers are permitted to pool the tips of those employees “who customarily and regularly receive tips.” 29 U.S.C. §203(m). Some examples of the types of employees who “customarily and regularly receive tips” are waiters, bellhops, waitresses, busboys and bartenders. Under federal law, a valid tip pool may not include employees who do not customarily and regularly receive tips, such as dishwashers, cooks, chefs and janitors. But what about an employee, who is principally responsible for serving customers but also has some limited supervisory responsibilities, is that employee entitled to participate in the tip pool? That is the question being litigated in a number of states by Starbucks employees.

Starbucks employs four types of workers—baristas, shift supervisors, assistant store managers and store managers. In most every state, there is little question that the store manager is not entitled to share in the tip pools. As to the other three job positions, the question of which employees are entitled to receive tips from the tip pool is less than clear. Starbucks policy provides that the tips received from customers are to be pooled and distributed among the baristas and shift supervisors.

In New York, a class of baristas filed suit against Starbucks (Barenboim v. Starbucks Corp.) alleging that Starbucks’ policy violates New York Labor Law, §196-d, which provides that “no employer or his agent or an officer or agent of any corporation or any other person” is permitted to demand or accept gratuities received by employees. The question for the court is whether a shift supervisor is an “agent” for purposes of the New York statute. The plaintiffs argue that the statue defines “agent” as a supervisor, and therefore the shift supervisor would qualify as an agent under the statute. The Second Circuit has said because the state statute does not define “supervisor” it is less than clear what degree of supervisory responsibility is necessary to meet that definition of supervisor.

A companion case, Winans v. Starbucks Corp., was filed by former Starbucks assistant store managers, alleging that under the same New York Labor Law, §196-d, they should be entitled to share in the tip pool with the baristas and shift managers because the majority of their time is spent serving customers. The Second Circuit determined that the same interpretive difficulties concerning what degree of supervisory responsibility is necessary to meet the definition of “supervisor” under Section §196-d, exists for the assistant store managers. Both cases have been certified to the New York Court of Appeals to address the issue, among other key issues, of what factors should be considered in determining whether an employee is an “agent” under Section §196-d.

In a similar case filed by a class of baristas in Massachusetts against Starbucks (Matamoros, et. al. v. Starbucks Corp.), the question of which types of employees are permitted to share in the tip pool was less ambiguous under that state’s Tip Act. The First Circuit upheld the district court’s decision awarding damages to baristas who had to share their tips with shift supervisors. The Massachusetts Tip Act provides that wait staff employees are not required to share tips with anyone who is not a wait staff employee. The Tip Act has a three-part test for meeting the definition of a “wait staff employee”: “a person, including 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. Both the district and First Circuit courts held that the Massachusetts Legislature was unambiguous in its writing of the Tip Act and because shift supervisors have managerial responsibility, albeit minimal, they are excluded from sharing in the tip pool.

The takeaway from the Starbucks cases for employers, especially those with locations in different states, is to make sure that your policies comply not only with federal wage and hour laws but also the wage and hour laws of the various states in which you do business.