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Second Circuit Asks for NY Court of Appeals for Tips on Tips

By Robyn Hagan Cain on October 26, 2012 | Last updated on March 21, 2019

Lawyers are a well-caffeinated bunch, and many of us get our regular fix at Starbucks.

You’ve probably noticed a plexiglass tip box next to the register while ordering your latte in your neighborhood Starbucks. While other coffee shops may boast tip jar/can variations with messages like “Tips = Good Karma” or “Thanks a Latte,” the Starbucks tip receptacles are uniform. And they’re the subject of a challenge before the Second Circuit Court of Appeals.

The question in the case: Which Starbucks staffers get to share in the tip box bounty?

Starbucks policy provides for these tips to be pooled and distributed among the baristas and shift supervisors, but it does not permit its store managers or assistant store managers (ASMs) to dip into the Starbucks tip pool. That policy resulted in two lawsuits.

In the first suit, Barenboim v. Starbucks Corp, plaintiffs representing a putative class of Starbucks baristas contend that New York Labor Law §196-d prohibits Starbucks from distributing pooled tips to shift supervisors.

The statute provides that "No employer or his agent ... shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee."

The baristas, who languish at the bottom of the Starbucks food chain, claim that shift supervisors are "agents" under the statute.

In the second claim, Winans v. Starbucks Corp., a putative class of ASMs sued Starbucks, claiming that they are not Starbucks agents ineligible to receive tips pursuant to §196-d, and therefore could not be excluded from sharing in the tip pool.

In awarding summary judgment in favor of Starbucks in both cases, the district court ruled as a matter of law that there was no genuine dispute of material fact that shift supervisors are not Starbucks agents under §196-d, and that, even if a genuine factual dispute existed regarding ASMs' gratuity eligibility, §196-d did not afford them a statutory right to receive distributions from the tip pools.

The Second Circuit Court of Appeals, however, was not so certain.

The Second Circuit noted that the cases presented two unresolved questions of New York law:

  1. What types of employees are eligible to participate in a tip-pooling arrangement, and what factors should inform a court's consideration of eligibility?
  2. If an employee is not an agent -- and therefore is eligible to receive tips -- may an employer deny him tip-pool distributions even though customers paid gratuities into the pool in compensation for his service?

Because both cases turn on the proper construction of §196-d -- and the New York Court of Appeals has yet to interpret the word "agents" under the statute or to decide whether an employer may exclude a tip-earning employee from the pool -- the appellate court deferred its decision and certified the questions to the New York Court of Appeals.

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