New York high court to hear latest in Starbucks tip sharing debate

Shift supervisors or managers and whether they can legally participate in tip sharing with fellow employees, due to their title or relationship to the employer, has been a contentious issue debated in various courts around the country in recent years.

Several years ago, a Sixth District California Court of Appeal judge ruled that a tip sharing policy forced upon dealers at a state casino was not in violation of California Labor Code 351 as long as any of the tip recipients weren't managers. Section 351 states that "a gratuity is the property of the employee to whom it was paid or left for, and prohibits employers or their agents from taking any part of the gratuity or deducting it from the employee's wages."

Alternately, in 2012, the Fifth Circuit Court of Appeals, ruled that tip sharing with shift managers at a Massachusetts Starbucks violated the Massachusetts' Tip Act which states that only wait staff and employees who have "no managerial responsibility" are allowed to share in tip arrangements.

Now the same issue is in front of the New York Court of Appeals to decide whether tip sharing with shift supervisors violates McKinney's Labor Law. The court heard oral arguments by both sides on heard May 28th.

The New York case up for review

Two original cases ( Barenboim v. Starbucks Corp. and Winans v. Starbucks Corp.) involved the issue of whether assistant stores managers, or shift supervisors, of Starbucks, a popular coffee chain restaurant, could be eligible to collect in the tip sharing with the baristas.

Plaintiffs in both cases essentially argued that shift supervisors are "agents" of the company and therefore cannot collect tips from the tip pool because it violates McKinney's Labor Law 196-d.

Section 196-d states that:

"No employer or his agent or an officer or agent of any corporation, or any other person 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 United States District Court for the Southern District of New York disagreed with the plaintiffs argument and ruled that including shift supervisors in weekly tip distributions did not violate the statute.

Plaintiffs, baristas, appealed the decision and the case landed before the Second Circuit Court of Appeals. The Appeals Court agreed to certify questions for the high court to decide.

It's essentially up to the New York Court of Appeals, the state's highest court, to determine the scope and application of New York Labor Law 196-d as it relates to Starbucks' tip pooling practices.

Given the large number of restaurants, bars, and coffee shops that operate with a gratuity policy, the decision will likely have a serious impact on many workers.