Starbucks Corp. owes baristas in Massachusetts $14.1 million for a policy that gave shift supervisors a share of the tips, the U.S. Court of Appeals for the First Circuit has ruled.
On November 9, a unanimous panel affirmed a March 2011 class certification ruling and a January 2012 final judgment and damages ruling by Judge Nathaniel Gorton of the U.S. District Court for Massachusetts.
Last month, the Second Circuit certified questions in two similar cases, Barenboim v. Starbucks Corp. and Winans v. Starbucks, to the New York Court of Appeals. The Second Circuit, which heard oral arguments in those cases in August, asked New York’s highest court what the term “agent” means under the state’s Labor Law.
The Massachusetts baristas sued Starbucks in May 2008, claiming that the state’s Tips Act bars shift supervisors from receiving any money from tip pools. In his class certification ruling, Gorton rejected Starbucks’ argument that he should deny class certification because some baristas who have since been promoted have an interested in the tip-sharing policy. “Indeed, were the Court to hold otherwise, an employer could readily insulate itself from class liability simply by establishing a communal ‘tip pool’ for both managerial and non-managerial employees,” Gorton wrote.
Gorton’s final judgment included a $7.5 million damages award, plus prejudgment interest at a rate of 12 percent per year. He also issued a treble damages award of $6.6 million for tips shift supervisors collected on or after Massachusetts amended its wage act, July 12, 2008. Starbucks appealed.
The First Circuit held oral arguments in the case in September. Judge Bruce Selya wrote the First Circuit opinion in Matamoros v. Starbucks Corp., joined by Judge O. Rogeriee Thompson and Senior Judge Kermit Lipez.
Selya wrote that the “plain language of the [Massachusetts] Tips Act prohibits the defendant’s tip-pooling policy.” The court rejected Starbucks’ argument that the class—consisting of baristas at any Starbucks Massachusetts store between March 25, 2005, and March 18, 2011—is improper because more than 450 former baristas became shift supervisors during the class period.
Selya wrote that the certified class is not monolithic and it embodies a potential for conflict. “But,” he noted, “perfect symmetry of interest is not required and not every discrepancy among the interests of class members renders a putative class action untenable.” He observed that “to forestall class certification the intra-class conflict must be so substantial as to overbalance the common interests of the class members as a whole.”
Selya provided three reasons for his ruling. First, a barista-turned-shift supervisor is considered a class member only for the period during which he or she worked as a barista. Second, he noted that a barista-turned-shift supervisor would not be required to reimburse funds he or she received from the tips pools after the promotion. Third, a barista-turned-shift supervisor has the right to opt out of the class.
Selya noted that even if some baristas occasionally perform some of the same roles as shift supervisors, their job description does not include managerial responsibilities. He concluded that “the questions of law and fact common to class members and presented by the plaintiffs’ complaint greatly predominate over any questions affecting individual members. We conclude, therefore, that a class action is superior to other alternative ways of adjudicating this controversy.”
The baristas’ lawyer, Shannon Liss-Riordan of Boston’s Lichten & Liss-Riordan, said she expects interest to boost the judgment closer to $18 million.
Liss-Riordan also said she expects a follow-up case she filed in January in Massachusetts Superior Court, Black v. Starbucks, to yield more than $6 million in damages. Ericka Black filed the purported class action on behalf of all baristas who have worked at any Massachusetts Starbucks since March 18, 2011. Starbucks removed the case to federal court in May, and Gorton, who is also the presiding judge on this case, stayed it in July pending the First Circuit appeal.
Liss-Riordan called the Matamoros ruling the culmination of an 11-year battle she’s been fighting in Massachusetts on behalf of tipped workers: “It’s a huge victory for workers in Massachusetts, particularly for workers in the hospitality industry. It is the lowest paid workers who will benefit from tip pools.”
She also said the fight wasn’t about how much shift supervisors should earn: “The fight is [about] whether Starbucks could defray the market costs [of supervisors' salaries] or whether they have to take it out of their own bottom line. The legislature and the court have spoken.”
Liss-Riordan said she is optimistic that the New York state high court will advise the Second Circuit that the state legislature decides how tips should be shared. “We have a strikingly similar fight in New York, where the plain language of the statute comes out the same.”
In an e-mailed statement, Starbucks spokesman Zack Hutson said the company is “evaluating the best way to change our tipping policy in Massachusetts to ensure compliance with state law while continuing to fairly reward our hard-working partners.”
Rex Heinke, a Los Angeles partner at Akin Gump Strauss Hauer & Feld who co-heads the firm’s Supreme Court and appellate practice, argued for Starbucks at the First Circuit.
Boston’s Goodwin Procter also represented the company.