Tip Pooling in Restaurants

The case of Chau v. Starbucks (2009) 17 C.A.4th 688 brought some clarity to tip pooling and who is entitled to share in gratuities (tips). In Starbucks, an employee brought a class action, alleging that his employer illegally required him to share his tips with management. 

Chau was a barista, which is an entry-level, part time job serving coffee. Next to the cash register at many Starbucks is a tip “cube.” A gratuity is placed in the tip cube non-specifically for the customer service “team.” At the end of the shift, a shift supervisor (but not a manager) tallies the tips and apportions them equally to baristas and shift-supervisors that worked during the shift.

A shift supervisor does the same job as a barista 90% of the time, but also has some management-like responsibilities such as supervising employees, opening and closing the store, and making deposits into the safe. The next higher level of responsibility is a store manager, who has the authority to hire and fire. Starbucks wisely had a policy prohibiting its managers from sharing in tips.

Chau alleged that Starbucks’ tip sharing policy violated Labor Code Section 351 because it allowed the employer’s “agent,” the shift supervisor, to receive a pro-rata share of the tips. Labor Code Section 351 declares that tips are the sole property of the employee, not the employer. Chau contended that a shift supervisor was an “agent” of management and therefore was ineligible to share in the tips. 

The trial court agreed with Chau that having the ability to supervise employees made shift-supervisors “agents” of Starbucks. As a result, the Labor Code prohibited them from sharing in tips. It awarded more than $86,000,000 in restitution. 

The Court of Appeals disagreed. It held that shift supervisors were not the kind of agent that the statute meant to prohibit from sharing in tips that are left collectively for a team. It emphasized that although a shift-supervisor had some authority to supervise, that person had no authority to discipline, hire or fire. 

Central to the holding of the Court of Appeals was the fact that customers left tips for the customer service team, which was comprised of baristas and shift-supervisors (but not managers). The case upheld that under certain circumstances, a restaurant can require tips to be shared among persons with some supervisory responsibility. 

There are a few broad principals about tip sharing:Tips are the property of the employees, not the employer,Requiring a waiter to share tips with a busboy can be legitimate,When tip sharing is required, there must a connection with the chain of service, but this can be expansively interpreted.

This issue of tip pooling will likely be a matter of further litigation and refinement of the law. 

Simon Mazzola provides legal expertise in employment, business, and construction matters. 

This information is provided for informational purposes only and should not be construed as legal advice. It should not be acted upon without consulting a licensed California attorney about the facts, particular needs and questions of the person or entity considering this issue.