Starbucks ordered to refund tips to baristas

A judge has ordered Starbucks Corp. to pay $86.7 million plus interest to thousands of California baristas after the court found the company had illegally forced those workers to share tips with shift supervisors.

"This is sending a message that you may be a big corporation and you may want to do it your way, but you still have to comply with the law and you can't subsidize your labor force," David Lowe, lead attorney for the plaintiffs, said Thursday.

Lowe said the restitution order plus interest, at 7 percent, could push the verdict to nearly $106 million. That's slightly more than half of what the company earned in profits during the most recent quarter.

Starbucks called the ruling "beyond all common sense and reason" and plans to appeal.

"Starbucks believes that our shift supervisors deserve their fair share of the tips that they receive from the tip jars in our California stores," the company said in a statement. "We are particularly disappointed that the Court's decision, which is a mere four paragraphs issued after a lengthy trial, did not even address the obvious unfairness to our shift supervisors in denying them tips."

A Starbucks spokeswoman did not believe the California ruling would have any effect in Washington.

The decision was the second legal action this month that was unfavorable to Starbucks, which is attempting a turnaround as its stock has tumbled 44 percent in the past 12 months. Earlier in March, the company agreed to pay an undisclosed amount to about 350 assistant managers who claimed in a federal case in Houston that they were forced to work off the clock. Starbucks also faces at least two other major workplace lawsuits -- one in California and one in Florida.

At Starbucks, and in many restaurants, customers leave tips in a large container that are shared. But the Starbucks workers alleged that the company's tip pool policy violated California's labor code because "agents" of the company, in this case shift supervisors, were sharing in the tips with baristas.

The California case originated in San Diego, and it covers roughly 120,000 baristas who worked for Starbucks in that state from October 2000 to February 2008.

San Diego County Superior Court Judge Patricia Cowett agreed with the plaintiffs in her March 19 restitution ruling Thursday. The judge also ordered Starbucks to stop sharing tips with shift supervisors.

Starbucks said Cowett's ruling was "not only contrary to law, it is fundamentally unfair and beyond all common sense and reason."

"The decision today, in our view, represents an extreme example of an abuse of the class action procedures in California's courts," the company said. "Starbucks therefore plans to appeal and to seek a stay of the court's ruling prohibiting shift supervisors from receiving tips in the future while the appeal is pending."

Lowe, the plaintiffs' attorney, said the law is clear and Starbucks doesn't want to comply.

"They were taking the position they were above the law," Lowe said.

The judge, in her ruling, said the $86.7 million judgment was derived from an hourly tip rate of $1.71 being taken by shift supervisors over nearly 50.7 million hours.

"This is money taken by Starbucks over an eight-year period," Lowe said. "It's a lot of tips."

The plaintiffs now must put together a distribution plan, which the court will review May 1.