January 07, 2013
Massachusetts Tips Act: Who is a manager under the law?

This case involves what may be the final decision in a long-running battle between a large retail corporation and federal and state courts around the Massachusetts Tips Act.

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What happened. Starbucks baristas—the busy people who take orders, brew, and serve coffee, and cash customers out—are tipped, which allows management to pay them far less than the minimum wage—currently $7.25 at the federal level.

Employers can pay tipped waitstaff just $2.13 an hour, on the assumption that they’ll recoup the extra wages, and perhaps more, through tips. But Starbucks also employs what it calls shift supervisors, and it has historically required baristas to share their tips with those supervisors.

The employer’s theory was that the supervisors spent such an enormous amount of time taking orders, brewing, and cashing out that they were not really managers at all. And, since customers drop their tips in collection jars rather than handing them directly to their servers, the jars were divvied up each day to include the supervisors.

A group of baristas first filed their class action lawsuit in 2008, and it has been to federal district court, to the First Circuit, back to the district, and now to the First Circuit again. On the first round, both sides appealed.

What the court said. Essentially, with minor exceptions, both courts have now ruled the same way twice. Appellate judges wrote in their first ruling, “Starbucks is the architect of these tip pools, which flout the law and lump together eligible and ineligible employees. If there is an inequity, the fault lies with Starbucks—not with the Tips Act.”

Starbucks relied on what it believed was the “primary duty” of its shift supervisors. The company’s internal documents show that the supervisors open and close the stores, handle and account for cash, ensure that baristas take their scheduled breaks, and—here’s the kicker—“directly manage three to six other employees while on shift.”

But Starbucks judged “primary” in terms of the time involved. Judges said that’s the wrong approach. The Tips Act specifies that tipped employees may have “no managerial responsibilities.” Supervisors had duties baristas couldn’t perform, and that’s the test. Matamoros et al., v. Starbucks, U.S. Court of Appeals for the 1st Circuit, Nos. 12-1189 & -1277 (11/9/12).

Point to remember: Class action suits for these kinds of wage violations can be very expensive: Starbucks owes the plaintiffs more than $14 million in past wages.

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