Tip Pooling Trouble

By Elizabeth Chilcoat

The First Circuit Court of Appeals recently issued a decision that underscores the importance of including only appropriate employees in tip pools.  In Matamoros v. Starbucks Corporation, the court affirmed a $14.1 million award to a class of current and former baristas from approximately 150 different stores because shift supervisors were improperly included in the tip pool.  The court applied Massachusetts state law, which creates a bright-line rule excluding any employee with managerial responsibilities from a restaurant’s tip pool.  Although the shift supervisors spent most of their time serving customers alongside the baristas, they could not be included in the tip pool because they had some managerial responsibilities.

Federal law, which applies in Arizona and Colorado, does not contain a similar bright-line rule.  Instead, the Fair Labor Standards Act permits an employee to be tipped if he or she is employed in an occupation that customarily and regularly receives at least $30 worth of tips in a week, and leaves the interpretation of the standard to the courts.  However, the size of the award in Matamoros– almost $100,000 per store – is  a sobering reminder to be certain that employees who should not participate in a tip pool are not participating in a tip pool.

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