Starbucks to Pay $100 Million in Back Tips

I couldn’t believe it when I heard it… but its true. Starbucks has been taking a percentage of its employee’s (barista’s) tips and giving them to the store managers and supervisors.

I thought we all knew that California State Law prohibits managers and supervisors from sharing in employee gratuities? Apparently not everybody does.

At the HR in Hospitality conference last week, much of the same topic was being discussed. In the restaurant/food-service industry, it’s pretty common for management to take a percentage of servers’ tips. I’m still on the fence about this policy… one the one hand I understand that “most” front-of-house managers do more than “manage” and “most” shift supervisors do more than “supervise”. They often do the “work” of others, usually when they’re busy or short staffed.

And on the other hand, servers earn minimum or below minimum-wage and rely on tips to make a living. So… when somebody takes a chunk out of their pay, it makes a dent, not only financially but also psychologically. How would you feel if somebody decided to take money from your pay because they helped you do your job? Or worse, they weren’t doing your job at all, they were doing their job or somebody else’s… why should you be penalized?

Valerie O’Neil, a Starbucks spokeswomen called the ruling “fundamentally unfair and beyond all common sense and reason.” Well, I don’t know if I’d go that far. The law is clear and I think Starbucks unfortunately is guilty of breaking that law. I believe that they had no bad intentions and that they “thought” they were doing the right thing so I don’t fault them at all.

Starbucks also took issue with the brevity of the judge’s ruling, which was only four paragraphs, saying she failed to address the unfairness to shift supervisors. While somewhat true, I think the real issue is not the judgment or the ruling, but more the actual confusion here. The law is designed to protect the workers that were affected. It is not designed to protect the shift supervisors.

Not only am I a partner at Entrypoint, I also am a partner in a pretty busy restaurant and have owned many food-service businesses in my past. I’m deeply connected to this issue, but even I understand what’s fair and what’s not and that the law is the law.

And this is the common problem that I see… a lot of people “blame” the law, when they haven’t invested the time and effort to devise solutions that keep them compliant with the law and at the same time protect all interests, including theirs and their various employees.

Laura Ho, the attorney that tried the case, said “Starbucks illegally took a huge amount of money from the tip pool to pay shift supervisors, rather than paying them out of its own pocket. The court’s verdict rightfully restores that money to the baristas”.

What do you think?

How does a company be compliant with the law, pay its employees a fair rate, and make money?

I think its possible… needs some time, effort and probably a good software package to ensure or monitor compliance.