In November 2013, the Second Circuit ruled against a class of Starbucks baristas claiming the Seattle-based coffee maker’s practice of allowing shift supervisors to participate in tip-pooling is illegal. Starbucks policy dictates that each store place a container at the counter where patrons may deposit tips. At the end of each week, the tips are distributed to baristas and shift supervisors. Starbucks does not permit its assistant managers or managers to share in the tips.

The class action was predicated upon New York Labor Law § 196-d, which bars employers, agents, or officers from accepting gratuities received by an employee. The last sentence of the law clarifies that “[n]othing in this subdivision shall be construed as affecting the…sharing of tips by a waiter with a busboy or similar employee.” In response to  two certified questions from the Second Circuit, the New York Court of Appeals looked to the last sentence of § 196-d in determining that employees who are “similar” to waiters and busboys may share in tips while employees who are dissimilar to those positions may not. Employees providing direct service to patrons remain tip-pool eligible even if they possess a small amount of supervisory responsibility. “We conclude that the line should be drawn at meaningful or significant authority or control over subordinates.”

Baristas are Starbucks’ front-line, entry-level workers. Shift supervisors, however, may assign baristas to particular positions, direct the flow of customers, provide baristas with feedback about performance, open and close stores, and change the cash register. It is significant that shift supervisors may not formally discipline employees or provide input on the creation of work schedules.  Shift supervisors spend a majority of their time performing the same tasks as baristas—serving food and beverages to customers.

While the court declined to explicitly define what type of meaningful authority would distinguish an eligible employee from an ineligible agent or officer, it suggested that such authority might include “the ability to discipline subordinates, assist in performance evaluations or participate in the process of hiring or terminating employees, as well as having input in the creation of employee work schedules.”  Since shift supervisors are not provided with such managerial responsibilities, they are eligible to received pooled tips.

 While the case itself is attributable to the somewhat murky language of § 196, the decision attempts to reconcile such language with a discretionary, common-sense approach. In this case, the “meaningful authority” test resolved the issue fairly easily.  Specifically the Court noted that “[n]o factfinder could conclude that shift supervisors have such a ‘substantial’ degree of ‘managerial responsibility.’” However, the absence of a bright-line rule leaves open the possibility for a more frustrating hair-splitting analysis in the future. Other states, such as Massachusetts, have enacted statutes explicitly mandating that wait staff employees only share tips with other wait staff that have “no managerial responsibility”. See MA G.L. c. 149, § 152A.