Starbucks Corp., the largest U.S. coffee-shop chain, must pay $105 million in penalties because the company's supervisors in California take a share of servers' tips, a state judge ruled.
Judge Patricia Cowett of the San Diego Superior Court issued the ruling March 19 in a letter sent to lawyers Thursday, according to David Lowe, an attorney for Starbucks servers. Under California law, employers are prohibited from taking employees' tips, he said. The lawsuit was filed in 2004 on behalf of 100,000 Starbucks "baristas" in about 1,400 stores.
"This whole case was about restitution," Lowe said. "It was about requiring Starbucks to repay the baristas for the money it had taken from the tip pool to pay the shift supervisors."
Cowett determined in February that Seattle-based Starbucks was liable for the tips. Based on that ruling, she blocked the company from sharing the tips based on "uncontroverted" testimony that it "continues to utilize the distribution of tips from the tip pool to compensate shift supervisors as well as baristas," according to Cowett's letter.
Supervisors are "precluded from sharing in tips from the tip pool," the judge wrote.
Starbucks, which said it will appeal, argued supervisors "deserve their fair share of the tips," according to a statement from spokeswoman Valerie O'Neil.
California law allows employees to pool tips, Lowe said, though supervisors, managers and owners anyone with the authority to oversee or direct other workers can't be paid out of the pool.
Cowett ruled Starbucks improperly distributed as much as $87 million to its supervisors, according to the letter. After adding 7 percent in annual interest, Starbucks must repay its servers more than $105 million, Lowe said.