Barenboim v. S, V. Starbucks Corp.

• Decision Date: 26 June 2013
• Citation: 2013 N.Y. Slip Op. 04754,972 N.Y.S.2d 191,21 N.Y.3d 460,995 N.E.2d 153
• Parties: Jeana BARENBOIM et al., Appellants, v. STARBUCKS CORPORATION, Respondent. Eugene Winans et al., Appellants, et al., Plaintiff, v. Starbucks Corporation, Respondent.
• Court: New York Court of Appeals Court of Appeals

21 N.Y.3d 460

995 N.E.2d 153

972 N.Y.S.2d 191

2013 N.Y. Slip Op. 04754

Jeana BARENBOIM et al., Appellants,

v.STARBUCKS CORPORATION, Respondent.

Eugene Winans et al., Appellants, et al., Plaintiff,

v.Starbucks Corporation, Respondent.

Court of Appeals of New York.

June 26, 2013.

Lichten & Liss–Riordan, P.C., Boston, Massachusetts (Shannon Liss–Riordan of counsel), and Joseph, Herzfeld, Hester & Kirschenbaum LLP, New York City (Daniel Maimon Kirschenbaum of counsel), for appellants in the first above-entitled action.

Outten & Golden LLP, New York City (Adam T. Klein, Lewis M. Steel and Molly A. Brooks of counsel), and Outten & Golden LLP, Chicago, Illinois (Paul W. Mollica of counsel), for appellants in the second above-entitled action.

Akin Gump Strauss Hauer & Feld LLP, Los Angeles, California (Rex S. Heinke, Gregory W. Knopp, Katharine J. Galston and L. Rachel Lerman, of the California bar, admitted pro hac vice, of counsel), Akin Gump Strauss Hauer & Feld LLP, New York City (Samidh Guha of counsel), and Akin Gump Strauss Hauer & Feld LLP, Washington, D.C. (Daniel L. Nash and Nathan J. Oleson, of the District of Columbia bar, admitted pro hac vice, of counsel), for respondent in the first and second above-entitled actions.

Eric T. Schneiderman, Attorney General, New York City (Steven C. Wu, Barbara D. Underwood and Julie M. Sheridan of counsel), for New York State Department of Labor, amicus curiae in the first and second above-entitled actions.

Jackson Lewis LLP, New York City (Jeffrey W. Brecher, Felice B. Ekelmdn, Noel P. Tripp and Tara Touloumis of counsel), for New York State Restaurant Association, Inc., amicus curiae in the first and second above-entitled actions.

Gladstein, Reif & Meginniss LLP, New York City (James Reif of counsel), and Harrison, Harrison & Associates, Ltd. (David Harrison of counsel) for UNITE HERE! Local 100 and others, amici curiae in the first and second above-entitled actions.

Fox Rothschild LLP, New York City (Carolyn D. Richmond, Eli Z. Freedberg and Rosemary P. Joyce of counsel), for New York City Hospitality Alliance, amicus curiae in the first and second above-entitled actions.

OPINION OF THE COURT

GRAFFEO, J.

The United States Court of Appeals for the Second Circuit has posed two questions regarding the legality of Starbucks Corporation's tip-splitting policy under Labor Law § 196–d.

I.

Defendant Starbucks Corporation is a Washington-based coffeehouse company that operates hundreds of outlets in New York State. In each store, Starbucks employs four categories of employees: baristas, shift supervisors, assistant store managers and store managers. Baristas are the front-line, entry-level employees responsible for tasks such as taking orders, making and serving the company's coffee, tea and food offerings, operating the cash register, cleaning tables and stocking product. They work on a part-time, hourly basis.

After six months' employment, baristas may become eligible for promotion to shift supervisors. Like baristas, shift supervisors are primarily responsible for serving food and beverages to customers. In fact, they spend nearly all their time performing the same customer-related duties undertaken by baristas. They also work on a part-time basis and are paid an hourly wage. As their title suggests, however, shift supervisors have some supervisory responsibilities, such as assigning baristas to particular positions during their shifts, directing the flow of customers and providing baristas with feedback about their performance. Shift supervisors may also open and close stores, change the cash register tills and, if neither an assistant store manager nor store manager is present, make bank deposits.

Assistant store managers represent the third rung in the Starbucks hierarchy. Although assistant store managers devote the majority of their time performing customer-oriented services, they also possess greater managerial and supervisory authority than shift supervisors. For example, they assist store managers in interviewing applicants, assigning work shifts to baristas and shift supervisors, and evaluating employee performance. They also participate in decisions to hire or fire employees, recommend corrective action for employee infractions and process payroll. In essence, an assistant store manager functions as the store manager's deputy. In contrast to baristas and shift supervisors, assistant store managers are full-time employees who receive a salary if they work at least 37 hours per week. And unlike baristas and shift supervisors, they are eligible for quarterly bonuses and certain benefits, including holiday and sick pay.

Finally, store managers constitute the highest rank in the workforce structure. With the support of assistant store managers, store managers are responsible for the overall operation of the store. They have the power to hire, promote, transfer, schedule, discipline and terminate baristas and shift supervisors. Store managers, like assistant store managers, are full-time, salaried employees who are eligible for various benefits.

Starbucks maintains a written policy governing the collection, storage and distribution of customer tips. Pursuant to this policy, each Starbucks store places a plexiglass container at the counter where patrons may deposit tips. Once these tip canisters become full, Starbucks requires, that they be emptied into a bag and the money is stored in a safe. At the end of each week, the tips are tallied and distributed in cash to two categories of employees—baristas and shift supervisors—in proportion to the number of hours each employee worked. Starbucks does not permit its assistant store managers or store managers to share in the weekly distribution of tips. The company's decision to include shift supervisors in these tip pools was the impetus for the first lawsuit before us, while its exclusion of assistant store managers underlies the claims in the second action.

In 2008, plaintiffs Jeana Barenboim and Jose Ortiz (collectively, Barenboim), two former Starbucks baristas, brought a putative class action in the United States District Court for the Southern District of New York alleging that Starbucks' policy of including shift supervisors in the tip pools was unlawful under Labor Law § 196–d. In particular, Barenboim claimed that shift supervisors should not be able to receive distributions from a store's tip pool because they are Starbucks “agents” who may not “demand or accept, directly or indirectly, any part of the gratuities, received by an employee” (Labor Law § 196–d). In other words, Barenboim contended that the tip jar proceeds belong exclusively to Starbucks baristas. On cross motions for summary judgment, the District Court granted Starbucks' motion, concluding that Labor Law § 196–d does not bar shift supervisors from participating in tip pools because their limited supervisory responsibilities “do not carry the broad managerial authority or power to control employees that courts have held to be sufficient to render an employee an ‘employer or [employer's] agent’ within the meaning of Section 196–d” (In re Starbucks Empl. Gratuity Litig., 264 F.R.D. 67, 72 [S.D.N.Y.2009] ). Barenboim appealed.

Meanwhile, plaintiff Eugene Winans and four other former Starbucks assistant store managers (collectively, Winans) filed a separate complaint in the same court asserting that assistant store managers are not ineligible “agents” and, therefore, they should be entitled to participate in the tip pools under Labor Law § 196–d. Put differently, they claimed that the tips should be distributed among baristas, shift supervisors and assistant store managers. On cross motions for summary judgment, the District Court concluded that there was a triable issue of fact as to whether assistant store managers are tip-pool eligible but awarded Starbucks summary judgment on the ground that, although Labor Law § 196–d excludes an employer or its agent from retaining tips, it does not compel an employer to include any particular eligible employee in a tip pool ( Winans v. Starbucks Corp., 796 F.Supp.2d 515 [S.D.N.Y.2011] ). Winans appealed.

Recognizing that the two appeals presented unresolved questions of New York law, the Second Circuit certified the following questions to us:

“1. What factors determine whether an employee is an ‘agent’ of his employer for purposes of N.Y. Lab. Law § 196–d and, thus, ineligible to receive distributions from an employer-mandated tip pool? In resolving this question for purposes of this case, the Court of Appeals may also consider the following subsidiary questions:

“a. Is the degree of supervisory or managerial authority exercised by an employee relevant to determining whether the employee is a ‘manager [or] supervisor’ under N.Y. Lab. Law § 2(8–a) and, thus, an employer's ‘agent’ under § 196–d?

“b. If an employee with supervisory or managerial authority renders services that generate gratuities contributed to a common tip pool, does § 196–d preclude that employee from sharing in the tip pool?

“c. To the extent that the meaning of ‘employer or his agent’ in § 196–d is ambiguous, does the Department of Labor's New York State Hospitality Wage Order constitute a reasonable interpretation of the statute that should govern disposition of these cases?

“d. If so, does the Hospitality Wage Order apply retroactively?

“2. Does New York Labor law permit an employer to exclude an otherwise eligible tip-earning employee under § 196–d from receiving distributions from an employer-mandated tip pool?” (698 F.3d 104, 118 [2d Cir.2012] ).

The Second Circuit clarified that it did not intend to “bind” us “to the particular questions stated” and invited this Court to “expand these certified inquiries to address any further pertinent question of New York law as it might pertain to the particular circumstances presented in these appeals” ( id.).

II.

Labor Law § 196–d, admittedly not a model of clarity, provides in relevant part...