Authored by Brigitte Duffy

Over the last decade, the Massachusetts food service industry has experienced a pervasive steam of litigation challenging tip pooling practices.  At its root is the Massachusetts Tip Statute, which strictly regulates who may participate in pooled tips and defines what is a “tip” subject to its regulation.  The statute defines a tip as a “sum of money  . . . given as an acknowledgment of any service performed by a wait staff employee” and a wait staff employee as someone who: (1) directly serves food and beverages or clears tables; (2) works in qualifying establishment – such as a coffee shop; and (3) “has no managerial responsibility.”

In Matamoros v. Starbucks Corp., a Magistrate Judge for the federal court in Massachusetts (whose decisions will now be subject to review by a District Court Judge), ruled that Starbuck’s policy of pooling tips left in counter-top tip jars between baristas and shift supervisor violated the Tip Statute because shift supervisors have managerial responsibility.  In doing so, the Magistrate Judge also recommended class certification – leaving Starbucks potentially liable for the tips distributed to shift supervisors, treble damages and twelve percent interest dating back to March 2005.

There was no dispute among the parties in Matamoros that both baristas and shift supervisors serve customers beverages and food and take orders and that shift supervisors spend the vast majority of their time serving customers and performing the same duties as baristas.  That said, Starbucks conceded that shift supervisors have addition responsibilities some of which are supervisory.  Shift supervisor direct partners to various workstations, handle and account for cash, open and close stores (alongside a barista), possess keys to the store, and handle the store’s alarm.  

In its defense, Starbucks argued that: 1) the shift supervisors’ limited supervisory responsibilities did not constitute “managerial responsibility,” and 2) if shift supervisors are not wait staff employees under the statute, then tips left for them are not tips regulated by the statute and could properly be distributed to them.  Interpreting the statute strictly and relying on several trial court decisions that concluded that even modest supervisory responsibilities disqualify an employee, the Court rejected the first argument.  Addressing the second argument, the Court conceded that to customers the barista and shift supervisor are indistinguishable and customers no doubt intended tips to go to the individual who served them, including shift supervisors.  Nonetheless, the Court concluded that because “money left by the customer [also] recognizes service performed by the baristas, the money qualifies as a ‘tip’” which baristas could not be required to share with shift supervisors.

This decision highlights the draconian scheme created by the Massachusetts legislature which ignores the business realities of the food service industry where the prospect of participating in tips motivates employees to both work as a team and provide excellent customer service.