About a year ago, Mark blogged about a tip pool case involving Starbucks where the tip credit (allowing employers to pay a sub-minimum wage) was destroyed when “improper” people (i.e. managers) shared tips along with rank-and-file employees.  Mark explained that the liability in these cases can be astronomical because the employer has to pay the difference between the tip credit wage, usually $2.13 per hour and the minimum wage ($7.25 under federal law).  Last year, the First Circuit ordered Starbucks to pay class action members $14.1 million in damages over tips.

Just 4 days ago, the Second Circuit held that allowing Starbucks shift supervisors to share in a tip pool does not violate New York law, despite only limited managerial responsibilities, because their primary duties of serving customers are the same as those of baristas.

The Second Circuit opinion concluded that Section 196-d of the New York Labor Law does not automatically preclude Starbucks shift supervisors from sharing in tip pools solely because they perform limited supervisory responsibilities.  Based on this interpretation, the court decided that “the limited nature of these supervisory duties, considered together with the shift supervisors’ ‘principal’ responsibilities to provide ‘personal service to patrons,’ cannot admit a finding of the ‘meaningful or significant authority or control over subordinates’ contemplated by § 196-d.”

The court agreed that shift supervisors devoted a majority of their time to the same tasks as baristas and were responsible primarily for serving customers.  It also found that shift supervisors performed some managerial duties, such as giving feedback to baristas about their performance and during shifts assigning baristas to particular positions.  The Second Circuit held, however, that “these supervisory responsibilities are limited.”

The takeaway for New York employers is that now under the New York Labor Law, employees with limited managerial capacity can participate in tip-splitting arrangements but not when they have “meaningful or significant authority or control” over other employees.

The case is Barenboim v. Starbucks Corp., 2013 BL 325303, 2d Cir., No. 10-4912, unpublished opinion 11/21/13.