Starbucks Corp. and baristas served up arguments at the U.S. Court of Appeals for the First Circuit about whether the Massachusetts Tips Law allows shift supervisors to split tips with baristas.
On Tuesday, the First Circuit heard oral arguments in Matamoros v. Starbucks Corp., an appeal by Starbucks of a damages award totaling $14.1 million for the plaintiffs and certification of their proposed class. The Second Circuit heard oral arguments in a similar case last month, Barenboim v. Starbucks Corp.
In March 2011, Judge Nathaniel Gorton of District of Massachusetts certified the class and granted the plaintiffs’ partial summary judgment motion by ruling that Starbucks shift supervisors are barred by the state’s tip laws from receiving any money from tip pools at the coffeehouse chain.
In January 2012, Gorton issued a final judgment awarding the plaintiffs a $7.5 million in damages plus prejudgment interest at a rate of 12 percent per year. He also issued a treble damages award of $6.6 million. Gorton trebled the damages attributable to the tips that shift supervisors collected on or after July 12, 2008, when Massachusetts amended its wage act. The change made treble damage awards mandatory for prevailing Massachusetts wage-and-hour claims.
Starbucks argues in its brief that shift supervisors are “wait staff” employees under the state’s tips law because they have only “limited supervisory” tasks and no “managerial responsibility.” The company also claims that the court’s ruling is contrary to the Tips Act’s purpose to ensure that service employees receive the tips customers leave for them. In addition, Starbucks asserts that the named plaintiffs don’t represent the interests of hundreds of former baristas who are now shift supervisors and who benefit financially from the current policy.
Starbucks further claims that the district court erred by enforcing the Massachusetts Wage Act’s treble damages provision because the law allows punitive damages without a showing that the punished conduct was reprehensible. The plaintiffs argue in their brief that the case is a “textbook violation” of the state’s tips law ban on managerial sharing of employee tip pool money.
In a cross-appeal, the four named plaintiffs are asking the court to award treble damages incurred before before July 12, 2008. They claim a 2004 tips law amendment barred managers from sharing wait staff tip pool money. “The District Court applied the wrong legal standard, and thus abused its discretion, when it concluded that treble damages were not warranted for this period because Starbucks’ conduct was ‘outrageous’ but not ‘outrageous enough,’” their brief states.
Judge O. Rogeriee Thompson sat on the panel with senior judges Kermit Lipez and Bruce Selya.
Early in the oral argument, Lipez asked Starbucks’ lawyer, Rex Heinke, a Los Angeles partner at Akin Gump Strauss Hauer & Feld who co-heads the firm’s Supreme Court and appellate practice, to define managerial responsibility.
Heinke said it’s not about opening and closing the store and putting money in the safe: “An employee certainly would have managerial responsibility if they had the authority to hire someone, to fire someone, to transfer them, to determine their bonus. [It's] those kinds of things, that is power over the conditions of employment over another employee.”
After further debate, Heinke said store managers are in control, and “occasionally the shift supervisors give some direction.” He also argued that Starbucks is not an especially hierarchical organization and that shift supervisors suggest which jobs the baristas should perform on a given day.
After further debate, Thompson said, “Someone is always in a position of making the ultimate determination throughout the entire work shift.”
The baristas’ lawyer, Shannon Liss-Riordan of Boston’s Lichten & Liss-Riordan, echoed that idea: “The buck still stops with someone.”
Liss-Riordan said there’s a Starbucks policy that a shift supervisor, assistant manager or manager must be on the premises of a store at all time. “Just because a management style or a company’s philosophy may be a quote more collaborative style doesn’t mean that there aren’t people who have a managerial responsibility,” she said.
According to Liss-Riordan, the job description for Starbucks’ shift supervisors states that they “directly manage three to six partners per shift.”
Liss-Riordan also discussed the Massachusetts attorney general’s 2004 advisory on the Tips Law, which said that “shift supervisors” cannot share wait staff tip pools.
“It’s hard to see how Starbucks could not have been on better notice that its policy violated the law.”
Sheri Qualters writes for The National Law Journal, a Daily Report affiliate.