Opinion ID: 810675
Heading Depth: 3
Heading Rank: 2

Heading: Exclusion from Starbucks Tip Pools

Text: Assuming without deciding that ASMs are not Starbucks agents under § 196-d, a second question arises in Winans’s appeal: Does New York Labor Law compel Starbucks to include ASMs in its stores’ tip pools? Section 196-d is silent as to whether an employer can exclude otherwise eligible tip-earning employees from a common tip pool. As the district court observed, “the plain language of Section 196-d does not grant any employee a right to participate in tip pools or to receive the proceeds therefrom. Rather, the statute defines who is eligible to participate in tip pools—waiters, busboys, and other similar 22 employees—and who is not—employers, their agents, and any other person.” Winans v. Starbucks Corp., 796 F. Supp. 2d at 519. Indeed, the purpose of § 196-d was to ensure not that certain employees are eligible to receive tip-pool distributions, but that certain individuals, i.e., the employer or his agent, are ineligible to receive the compensation that customers believed they were paying to other employees. “The drafters of Labor Law § 196-d sought to end the unfair and deceptive practice of an employer retaining money paid by a patron under the impression that he is giving it to the employee, not to the employer.” Samiento v. World Yacht Inc., 10 N.Y.3d at 78 n.4, 854 N.Y.S.2d at 87 n.4 (internal quotation marks omitted). In light of the statute’s purpose to define who is ineligible to retain tips and its silence with respect to whether a tip-eligible employee must retain some portion of his gratuities, the district court ruled that § 196-d does not require an employer to include any particular employee or group of employees in its tip pool. See Winans v. Starbucks Corp., 796 F. Supp. 2d at 519. Rather, who participates in a tip pool is a decision left to the employer’s discretion. Winans challenges this conclusion, arguing essentially as follows: (a) ASMs receive tips when they serve customers, which tips are placed in a common jar;3 (b) § 196-d 3 There is a dispute of fact as to whether customers served by an ASM who place a gratuity in the common tip jar actually expect that gratuity to be paid to the ASM. Compare Starbucks Br. (Winans) 23 (stating that there is no evidence of customer deception), with Winans Br. 31–35 (identifying evidence that ASMs engage primarily in customer service and, therefore, urging inference that customers would expect ASMs to receive portion of their tips), and Winans Reply Br. 14–15 (emphasizing that ASMs spend “up to 98% of their days” involved in customer service). In reviewing Starbucks’s motion for summary judgment, we must assume that this factual dispute would be resolved in favor of Winans, see Novella v. Westchester County, 661 F.3d at 139, and therefore that customers served by an ASM expect that ASM to receive some portion of their tips. It is also undisputed that no Starbucks policy forbids ASMs from accepting tips given directly to them rather than placed in the common tip jar. But there is no evidence in the record of such direct tipping. 23 forbids employers from retaining tips paid to an employee, but an employer retains tips when he collects them from one group of employees and distributes them to a different group of employees, insofar as this subsidizes the wages that the employer otherwise would have to pay from its gross revenues; and, therefore, (c) Starbucks should be prohibited from excluding ASMs from the tip pool while at the same time retaining tips earned by ASMs and paying them to other employees—here, baristas and shift supervisors. Winans’s construction of § 196-d cannot be dismissed as implausible. Indeed, the statute says nothing indicating that this sort of total tip redistribution from one employee to another is permissible. Insofar as the second sentence of § 196-d expressly permits some tip redistribution—specifically, tip sharing by “a waiter with a busboy or similar employee,” N.Y. Lab. Law § 196-d—the statute simply approves the standard practice of waiters sharing tips with waitstaff who assist them but do not receive tips on their own. Winans contends that Starbucks’s challenged policy involves the wholesale taking of ASMs’ tips in order to redistribute them to lower-level employees, which § 196-d does not expressly sanction. Winans also asserts that Starbucks’s policy toward ASMs finds no support in the Department of Labor’s Hospitality Wage Order. The Order states that employers may mandate a tip-pooling system and allocate tips to their employees according to fixed percentages, see N.Y. Comp. Codes R. & Regs. tit. 12, § 146-2.16(b), but it does not expressly permit an employer to exclude an employee from receiving any distributions from a tip pool that includes tips earned by that employee. On the other hand, Starbucks is correct that the Hospitality Wage Order affords an employer discretion to create tip pools and to decide the formula for tip distributions from those pools. It does not mandate the inclusion of any particular employees in such pools. 24 Starbucks additionally notes employers’ discretion to prohibit certain employees from receiving tips. See N.Y. Comp. Codes R. & Regs. tit. 12, § 142-2.21 (defining “tips” and “gratuities,” and stating that “[n]o gratuities or tips shall be deemed received for the purpose of this Part if their acceptance is prohibited by the employer or prohibited by law”). Plaintiffs counter that § 142-2.21 permits an employer to ban all tipping, not all tips for specific employees, much less a share in a tip pool that includes gratuities for services performed by the excluded employee. Further, plaintiffs note that N.Y. Comp. Codes R. & Regs. tit. 12, § 146-2.18 states that “[a] charge purported to be a gratuity must be distributed in full as gratuities to the service employees or food service workers who provided the service.” Plaintiffs contend that this regulation commands that, when a customer gives a tip as consideration for service, the employee who provided that service must receive that payment or, at a minimum, a share of that payment from the tip pool. No New York court has yet construed these regulations or explained how they interact, nor can we confidently predict how the New York Court of Appeals would apply them in the context of this case. Further, in the Winans case, as in Barenboim, the parties agree that the court must interpret § 196-d liberally in favor of employees, see Samiento v. World Yacht Inc., 10 N.Y.3d at 78, 854 N.Y.S.2d at 87, but they contest what this liberal construction would entail. Winans urges that it would require Starbucks to include ASMs in the tip pool, so that all employees can benefit from customers’ gratuities. Starbucks responds that including fulltime, salaried ASMs in the tip pool would harm baristas and shift supervisors by reducing their share of tip-pool distributions. Winans counters that baristas and shift supervisors are not harmed by being required to share a tip pool with all employees whose gratuities are included therein. Indeed, a contrary holding results in their receipt of a windfall. Winans 25 submits that the arrangement allows Starbucks to avoid paying the baristas and shift supervisors at the expense of ASMs. Which one of these interpretations is most consistent with Samiento’s command liberally to construe § 196-d in the employees’ favor is not obvious and involves state policy judgments best decided in the first instance by the New York Court of Appeals. See Joseph v. Athanasopoulos, 648 F.3d at 67.