California Labor Law: Tip Pools Complex

Los Angeles, CA When it comes to California labor law and federal labor law, what a person’s job duties are is more important than their job title in determining how they are paid. Many a California labor lawsuit has alleged that an employee was misclassified as exempt from overtime pay based on a managerial job title, even if that employee regularly carried out non-managerial duties. When it comes to California state labor laws, tip pools can be just as complex.

A recent decision in New York is reminiscent of one in California from 2009. The lawsuit in New York involved Starbucks baristas, who alleged shift supervisors should not be eligible to participate in the tip pool because they are supervisors and make more than the baristas. According to NBC News (6/26/13), the New York Court of Appeals found that shift supervisors are eligible to share in the tip pool because their main duty is to serve food and drinks.

The court found, however, that assistant store managers should not be included in the tip pool because they have too many managerial duties, including hiring and firing, so they could not be classified as wait staff.

In 2008, Starbucks faced a similar lawsuit in California (Chau vs. Starbucks), with the Superior Court of the State of California finding that the coffee chain must pay its baristas $100 million to settle a lawsuit, arguing shift managers should not be part of the tip pool.

But in 2009, the California Court of Appeals in San Diego ruled that shift supervisors are eligible to share in the tip pool, reversing the lower court decision. The Los Angeles Times (6/3/09) reported at the time that the court found that shift supervisors performed the same tasks as baristas.

Under California state law, employers or agents of employers cannot receive any part of a tip left for an employee, with the legal definition of an employer or agent being someone who has the authority to supervise or direct workers. Baristas argued they should not share their tips with shift supervisors because they were managerial, but Starbucks said its shift supervisors spent up to 95 percent of their time making and taking coffee orders, essentially the same work that baristas perform. Furthermore, Starbucks argued that although shift supervisors had some supervision authority, they could not hire or discipline baristas, limiting their authority.

As with so many labor laws involving pay, the important thing is not the worker’s job title, but the actual duties the worker performs. So it is not enough to say that the employee is managerial. The duties the employee regularly performs must reflect that title for that employee to be exempt from overtime pay and tips.