The good news: Starbucks is not the only coffee shop caught with their hand in their employee’s pockets.
The bad news: Their judgment 100% more than the settlement their competitor agreed to.
Earlier this year, Seattle-based Baristas Coffee Co. settled an employment lawsuit brought against them by the U.S. Department of Labor (DOL). Under the terms of the settlement, two Baristas’ company officers, Barry Henthron and T. Scott Steciw, had to pay $75 thousand in back wages and damages to current and former employees.
Now, the 1st Circuit U.S. Court of Appeals has hit Seattle-based Starbucks with a $7.5 million judgment for violating the state’s Tips Act.
Under Starbucks’ policy, tips are divided among the baristas and shift supervisors in proportion to the number of hours they work. However, under federal law, employers, which include supervisors and managers, are not allowed to be part of the pool.
Starbucks argued that since shift supervisors served customers alongside the baristas they deserved to be tipped. The 1st Circuit vehemently disagreed saying “since “Starbucks is the architect of these tips 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.”
The appellate court affirmed the trial court’s finding that Starbucks shift supervisors had improperly taken $7.5 million in tips over a six year period. Starbucks has over 17 thousand locations throughout the United States. A similar lawsuit is pending in New York. It is expected that other similar lawsuits against Starbucks could arise in other states with the potential for a class action suit.
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