Co-authored by John W. Egan and Nadia S. Bandukda

As we previously reported, the Second Circuit has been considering the validity of Starbucks’ tipping practices in light of the opinion from the New York Court of Appeals clarifying the prohibition in the New York Labor Law against participation in tip-pooling arrangements by employers and their “agents.”

With its certified questions answered, the Second Circuit has now upheld Starbucks’ policy allowing its shift supervisors to participate in tip pools.  In the decision, the Court observed that shift supervisors, like baristas, spend most of their time providing customers with food and drinks.  While acknowledging that they have some managerial responsibilities, the Court held that those responsibilities do not rise to the level of “meaningful or significant” authority over subordinates, which the New York court said was necessary to disqualify them from participating in the tip pool.  Specifically, the Second Circuit said that shift supervisors cannot issue formal employee discipline or create work schedules, even though they do designate break times during shifts and send baristas home who are not needed.  Accordingly, the Court affirmed summary judgment in favor of Starbucks.   

While the Court’s decision is a “Summary Order” and has limited precedential effect, it is nonetheless a favorable outcome for employers that administer tip pools.  For Starbucks, the decision means that this long-percolating dispute over distribution of its employees’ tips may finally be nearing the end of the brewing cycle.