Dealing with Tipped Employees: The Implications of the $105 Million Starbucks Verdict

In a decision that sent shock waves through the restaurant industry, with implications for businesses that rely upon "tipped employees," a San Diego Superior Court judge issued a decision in Chau v. Starbucks Corp., Case No. GIC836925, on March 19, awarding more than $100 million to a class of former Starbucks "baristas" in California. The award gave restitution for tips illegally paid to "shift supervisors" through the tip-pooling practice utilized by Starbucks. Not surprisingly, following the court's ruling, at least three additional class actions accusing Starbucks of illegal tip-pooling practices were subsequently filed in state and federal courts across the country, including in New York, Minnesota, and Massachusetts. More suits are expected, as more than 30 states have enacted some form of "tip" law. The Starbucks verdict and these lawsuits have significant implications for any employer that relies upon "tipped employees."

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