New York Court of Appeals to Decide Whether Supervisors May Pool Tips With Employees

On May 28, 2013, the New York Court of Appeals heard oral argument in two cases, which are likely to impact New York’s restaurant and hospitality industries.  In the companion cases of Barenboim v. Starbucks and Winans v. Starbucks, the Court is being asked to decide what factors determine whether an employee is considered an employer’s “agent.”  Under New York Labor Law 196-d, agents are prohibited from pooling tips with employees.  The Court is also being asked to determine whether an employer may exclude an otherwise eligible employee from tip pooling under the law. In Barenboim, Starbucks baristas argue that Starbucks’ policy of distributing pooled tips between baristas and shift supervisors is illegal because shift supervisors are agents.  Conversely, in the companion case of Winans, Starbucks assistant store managers argue that Starbucks has impermissibly excluded them from tip pools because they are not agents, and that New York Labor Law 196-d prevents employers from excluding otherwise eligible employees from tip pools.  Whichever way the Court decides these issues is almost certain to have a significant effect on New York employers and the way in which they compensate tipped employees who also have supervisory or managerial responsibilities. Hospitality industry groups estimate that the decision will impact 42,000 businesses statewide and a quarter-million workers in New York City.  Last year, the First Circuit Court of Appeals determined that Starbucks’ policy of tip pooling between baristas and shift supervisors violated a Massachusetts law which prevents food service employees with “managerial responsibility” from tip pooling.  Consequently, the First Circuit upheld a $14.1 million award against Starbucks. We will continue to report on these cases and their effect on New York employers.  For more information, please contact John R. Vreeland, Esq., Director of the firm’s Wage & Hour Compliance Practice Group, jvreeland@genovaburns.com, or Joseph V. Manney, Esq., jmanney@genovaburns.com.