Starbucks has reason to choke on its latte after a California Court awarded $100,000,000 to its baristas as a result of an improper tip-pooling arrangement. (A barista is one of those people in Starbucks cafes who make up your drinks. They are apparently hourly employees in most cases.)
Since the year 2000, Starbucks has employed as many as 120,000 baristas in California alone. The policy at these cafes has been to divide tips among the hourly employees (the baristas) and the supervisors, who are paid flat salaries. The total tips received by the supervisors since 2000 was $84,000,000, and with interest the amount exceeds $100,000,000.
The Court’s ruling was based on a statute which provides that tips left for hourly employees may not be “taken” by employers or “agents”; the Court deemed supervisors to be agents of the employer. That Starbucks has appealed the decision and vigorously challenges the Court’s finding should surprise no one; California may be the largest state, but it’s only one of 50, and similar lawsuits are being filed across the Country.
If Starbucks fails to have the ruling reversed, and if other states have similar statutes protecting hourly employees, the cost to Starbucks could be staggering.
Starbucks’ stock has dropped by 50% in value over the past 48 months. This ruling can only exacerbate its problems. On the other hand America’s thirst for coffee-based drinks seems incapable of being slaked, and it is likely that Starbucks will survive (with or without grumpy supervisors!).
— Ken Butera