California Labor &
Employment Law Blog
May 2, 2008

Rise in Tip Pooling and Related Class Action Lawsuits

Topics: Wage & Hour Issues

As previously posted on this blog, in March a San Diego judge awarded over $85 million dollars to a California class of Starbucks employees who successfully argued that Starbucks had improperly allowed shift supervisors to share in the employee tip pool and thereby denied other non-supervisory employees their fair share of the tips. Starbucks' position is that the shift supervisors did not have the necessary supervisory responsibilities to be considered "supervisors," as the law defines that term, and that because of their customer service responsibilities, they were properly allowed to share in the tip pool. Starbucks is expected to appeal the verdict and it has recently made public statements and statements to its employees supporting its position and its confidence in the appeal. Even if Starbucks does succeed on appeal, the superior court decision is already producing ramifications for employers with tipped employees.

Within weeks of the decision, separate similar lawsuits were filed against Starbucks in Massachusetts, New York and Minnesota by two different law firms. Other industries are also being adversely affected. Baggage handlers have brought tip pooling lawsuits against the struggling airline companies. Casinos, restaurants, and other hospitality and service industry employers are also seeing more and more of these claims. As news of the Starbucks decision and wave of tip pooling lawsuits continues to circulate and be discussed by the plaintiffs' bar, a snowball effect is likely to ensue. Employers who have mandatory tip pools in their workplaces should not sit back waiting to be the next victim. In California, damages for an improper tip pool can be awarded to all current and former employees who were improperly denied a fair share of the tip pool over the last four years.

At-risk employers should consider auditing their tip pooling practices to make sure that they are in compliance with both state and federal law. To review a very basic discussion of the general guidelines on tip pooling regulations applicable to California employers, click here http://www.cdflaborlaw.com/view_article.php?id=108&s=0. Employers who seek more information on this topic can also contact Kendra Miller at kmiller@cdflaborlaw.com in Southern California or Jeremy Naftel at jnaftel@cdflaborlaw.com in Northern California.

About CDF

For over 25 years, CDF has distinguished itself as one of the top employment, labor and immigration firms in California, representing employers in single-plaintiff and class action lawsuits and advising employers on related legal compliance and risk avoidance. We cover the state, with five locations from Sacramento to San Diego.

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About the Editor

Robin Largent has a regular presence in California state and federal courts and has been lead defense counsel and appellate counsel for large and small California employers in litigation (and arbitration) ranging from individual discrimination and harassment claims to complex wage and hour representative and class actions. She also leads the firm’s appellate practice, having substantial experience and success handling appeals, writ petitions, and amicus briefs in both state and federal court on issues such as class certification (particularly in the wage and hour arena), manageability and due process concerns associated with class action trials, exempt/non-exempt misclassification issues, meal and rest break compliance, trade secret/unfair competition matters, and the scope of federal court jurisdiction under the Class Action Fairness Act.
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