Frankfurt Kurnit Klein & Selz

December 2nd, 2013

Federal Court Says Supervisors May Participate in Tip Sharing

On November 21, 2013, the Second Circuit in New York issued a decision in Barenboim v. Starbucks, interpreting § 196-d of New York's Labor Law, which prohibits an employer, his or her agent or an officer of a corporation from retaining any part of a gratuity. The Court overruled arguments by plaintiffs in a potential class action of Starbucks employees, and said "an employee whose personal service to patrons is a principal or regular part of his or her duties may participate in an employer-mandated tip allocation arrangement" even if that employee possesses limited supervisory responsibilities. Accordingly, Starbucks' shift supervisors, who were authorized to open and close stores, to change the cash register tills, deposit money in the bank, coach other employees' performance and perform other supervisory activities, were permitted to participate in the tip pool.

The Court recognized that there comes a point when such employees acquire a sufficiently "substantial degree of managerial responsibility" so that they are "no longer akin to 'general waitstaff'." At that point, supervisory employees become managers, and so cannot participate in the tip pool. However, this decision provides some comfort to restaurant, bar and other food service employers and others that they may assign employees to supervisory capacities, including coordinating schedules of their fellow employees, without having to exclude them from tip pools and treat them as managers for all purposes.

Frankfurt Kurnit continues to advise its clients in the restaurant, bar and food service industries, like others, in the detailed regulatory regimes applicable to employee relations. For guidance as to whether a particular business practice is legal according to the newly announced standards, contact Wendy Stryker at (212) 705 4838 or wstryker@fkks.com.