May 29, 2013 at 11:25 AM ET
A tempest in a coffee cup is brewing over who gets the tips you leave in the jar at the local Starbucks.
Baristas -- the fancy name for the folk who make lattes and cappuccinos -- say they are entitled to the coins and bills left by customers. Their managers believe they have a right to the gratuities, too.
New York's highest court began hearing arguments this week in the tip-jar dispute that could have broad consequences for the state's hospitality workers and, ultimately, employees at the coffee chain's thousands of U.S. retail stores.
A federal appeals court has asked the state Court of Appeals to interpret New York labor law and its definition of an employer's "agent," who is prohibited from tip sharing, in connection with two lawsuits against Starbucks, which allows baristas and shift supervisors — but not assistant managers — to dip into the tip jar.
The federal court is seeking answers on two specific questions: What factors determine whether an employee is an agent of the company? Does state law permit an employer to exclude an otherwise eligible tip-earning employee from sharing in such a tip pool?
On one side are hourly-wage baristas who serve customers and share tips based on hours worked. On the other side are salaried assistant managers who want a share of the gratuities. In between are shift supervisors with limited management responsibilities who mainly serve customers, get paid hourly and also share tips.
Hospitality industry groups say the state court decision will be felt far beyond Starbucks, immediately affecting 42,000 New York businesses statewide and a quarter-million hospitality industry workers in New York City alone.
Attorney Shannon Liss-Riordan, representing the baristas, says the shift supervisors should also be excluded from the tip jar since they make work assignments and have authority over baristas and therefore qualify as company agents. The supervisors also coordinate breaks and receive higher wages, she said.
Attorney Adam Klein, representing the assistant managers, said they spend most of their time serving customers and deserve tips. They lack the authority to hire and fire staff and therefore should not be considered company agents under the law, he said.
Company attorney Rex Heinke defended the existing tip-sharing policy, saying baristas and shift supervisors divide up the cash jar weekly because they essentially provide the same customer service while assistant store managers are excluded because they have a different role and "real power" over the others, including scheduling and recommending hiring and firing.
The employer's responsibility is to come up with "a reasonable, fair system" for sharing pooled tips, and the company does have authority to exclude employees deemed eligible under state law, he said.
"Why, if they're eligible, do you have the authority to say they can't get it?" Chief Judge Jonathan Lippman asked. "You can't take that tip money. You're kind of the trustee of that tip money. Why should you have that authority?"
The practical reality, which the state labor department realized with its latest regulation, is that someone has to decide that allocation, Heinke said. There's nothing in the statute that gives the department that power, and it's left to the employer, he said.
Seattle-based Starbucks has nearly 18,000 retail stores in 60 countries. In April, it reported $3.6 billion in quarterly revenues. The company had 413 company-owned stores in New York at the end of its last fiscal year. Company spokesman Zack Hutson said the tip policy is applied consistently across the U.S., though not globally because laws differ in other countries.
The Associated Press contributed to this report.