Second Circuit Seal.jpgCo-authored by John W. Egan and Robert Whitman

Tip pools and tip sharing are hot topics in New York for employers in the food service and hospitality industries. The Second Circuit recently certified to the New York Court of Appeals two questions seeking to clarify the New York Labor Law’s prohibition against participation by an employer’s “agents” in tip pools and sharing arrangements.

The court’s certification order came in two consolidated class actions involving Starbucks “baristas.”  In Barenboim v. Starbucks Corp., the issue before the district court was whether shift supervisors are entitled to share in the gratuities deposited in tip jars. The plaintiffs argued that the shift supervisors, by assigning baristas to positions during their shifts, administering break periods, directing the flow of customers, and providing feedback on baristas’ performance, are supervisory “agents” of the employer and thus ineligible to participate in tip pooling under Section 196-d of the Labor Law.

The second case, Winans v. Starbucks Corp., presented a similar issue in inverse form: a putative class of assistant store managers claimed that they are not agents of the employer and thus are entitled to participate in the stores’ tip pools. Further, they argued that Starbucks was mandated by the Labor Law to include them in these pools.

The district court granted summary judgment to Starbucks in both Barenboim and Winans. The Second Circuit deferred decision on these appeals, and certified the following questions to the New York Court of Appeals: 

    1. “What factors determine whether an employee is an ‘agent’ of his employer for purposes of N.Y. Lab. Law § 196-d and, thus, ineligible to receive distributions from an employer-mandated tip pool?,” and
    2. “Does [the Labor Law] permit an employer to exclude an otherwise eligible tip-earning employee under § 196-d from receiving distributions from an employer-mandated tip pool?” 

We will be closely following any rulings from the Court of Appeals on Barenboim and Winans. Keep following the blog for future updates on these important cases.