NYCAppCt.jpgCo-authored by John W. Egan and Robert Whitman

We reported [here] in November on the Second Circuit’s referral of two important Labor Law questions to the New York Court of Appeals in a challenge to Starbucks’ tip-pooling policy.  Briefing is now complete and oral argument is scheduled for next week. 

The consolidated appeal, in Barenboim v. Starbucks and Winans v. Starbucks, will clarify Section 196-d of the Labor Law, which prohibits employers and their “agents” from participating in employee tip pools and tip-sharing arrangements.

In a relatively rare occurrence, the New York State Department of Labor filed an amicus brief with the Court of Appeals.  The Department argues that its Hospitality Industry Wage Order [here] fully answers the first question certified by the Second Circuit: what factors make an employee an “agent” of his employer under Section 196-d such that he or she is ineligible to participate in a tip pool? 

Under the Wage Order, employees who personally serve customers as a principal and regular part of their job duties may participate in tip pools, while those who do so only occasionally or incidentally may not.  The Starbucks “baristas” argue that shift supervisors are “agents” of their employer because of their supervisory responsibilities and therefore should not be permitted to obtain a share of their tips.  In its amicus brief, the Department took direct aim at that argument, stating that the Labor Law does not categorically bar employees with supervisory titles or authority from participating in tip pools, so long as they regularly provide direct personal service to customers.

On the second question certified on appeal — whether the Labor Law permits an employer to exclude otherwise eligible employees from participating in a tip pool — the Department’s answer is: not necessarily.  Whether such a practice is valid depends, it says, on whether the practice is consistent with two underlying purposes of Section 196-d: the protection of subordinate employees and the reasonable expectations of customers. 

The Department concluded, however, that the Court of Appeals cannot properly assess Starbucks’ policy of excluding Assistant Store Managers from tip pools, since the federal district court did not resolve factual disputes over their actual responsibilities and whether customers reasonably expect the proceeds of their gratuities to be shared with these employees.

We will continue to follow these cases and will grind out further updates (as well as additional coffee puns) as warranted.