A San Diego Superior Court judge ruled yesterday that Starbucks has to pay nearly $106 million in restitution to an estimated 120,000 current and former baristas in California because the coffee company illegally allowed supervisors to share in tip pools over the past eight years.
The four-paragraph ruling by Superior Court Judge Patricia Cowett capped a class-action lawsuit filed four years ago against the coffee giant.
Cowett also said she would slap an injunction on the company ordering it to halt the practice of allowing shift supervisors to share in money from the ubiquitous tip jars at the more than 2,000 Starbucks stores in the state.
“It’s a huge victory for the baristas,” said David Lowe, an attorney for the plaintiffs, using the term for the counter workers who make the lattes and cappuccinos.
“Starbucks has taken the position throughout this case that they should be allowed to do whatever they wish, regardless of California law,” he said. “They have been defiant on that issue but now this means they not only have to reimburse the baristas but they have to follow the law.”
The award is likely the largest ever in a tip-pooling case in the state, legal experts said.
In California, owners, managers or other “agents” of business owners can’t share in tips. In the first phase of the class-action suit, Cowett ruled that shift supervisors were essentially agents under state labor law, and therefore the company’s policy allowing them to share in tips violated that law.
The company argued that shift supervisors were not managers or supervisors, that they performed many of the same tasks as baristas, and should share in the tips.
In a sharply worded statement yesterday, Seattle-based Starbucks spokeswoman Valerie O’Neill said Cowett’s ruling was unfair to the shift supervisors.
The company will appeal and will also seek to postpone the injunction halting the practice until the appeal is resolved.
The case “represents an extreme example of the abuse of class-action procedures in California courts,” O’Neill said in the statement.
The award represents an estimated amount of cash from tip pools that was paid out to shift supervisors at the company’s California stores between October 2000 and February 2008.
Experts who testified during the non-jury trial on behalf of the plaintiffs used a sampling of 5,400 tip records from a random selection of 250 stores in the state, Lowe said.
The experts estimated the hourly tip rate $1.87, plus or minus 16 cents, during the time period, he said. In determining the restitution amount, Cowett took the low estimate of $1.71 cents and multiplied it by the hours worked by shift supervisors.
She ordered the company to pay $86.6 million in back tips, plus interest that plaintiffs estimated will be $19.1 million.
The total represents the amount paid out to shift supervisors during the eight-year period that now has to be returned to the baristas. The reimbursement for individual workers has not been determined.
“The number is groundbreaking,” said Timothy Kolesnikow, an El Segundo lawyer and former attorney for the state labor commissioner.