Victory for Starbucks in Tip-Pooling Class Action

Starbucks appealed the findings of the court, and the California Court of Appeal reversed the decision of the trial court, finding that the tip-pooling policy is not a violation of the specified labor code.  In reaching this decision, the Court explained that Starbucks required that tips left by customers in a collective tip box were to be shared among baristas and shift supervisors, with each employee receiving his or her fair share of the tip proceeds.  By having this policy in place, Starbucks ensured that collective tips were equally distributed to those who earned them.

The Court also concluded that Starbucks' policy was in line with the legislative intent of the specified labor code, which was designed to prohibit a business owner from deceiving a customer who left a tip for a specific employee by requiring that the employee later transfer any part of the tip to the employer.  By providing a collective tip box for customers, Starbucks' customers intended to collectively tip the employees for their work as a "team", and requiring that these collective tips be given only to baristas would mislead the public.

This decision provides invaluable guidance to hospitality industry employers in California on how to establish tip-pooling policies that comply with the law.  And, unless the decision is overturned by the California Supreme Court, it may bring an end to tip-pooling class actions in the future.