Shift supervisors at Starbucks are now able to receive tips!  A judge previously awarded $86 million in restitution to a class of Starbucks baristas on the grounds that Starbucks's policy permitting shift supervisors to share in tips that customers place in a collective tip box violated the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200) based on a violation of Labor Code section 351.

Starbucks appealed the decision and, in a somewhat surprising decision, the fourth appellate district concluded that Starbucks's tip-allocation policy did not violate California law.

According to the court, the applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes.  The appellate court held that the lower court's ruling was improperly based on a line of decisions that concerns an employer's authority to mandate that a tip given to an individual service employee be shared with other employees.

The policy challenged in Chau v. Starbucks presented "the flip side of this mandatory tip-pooling practice"  - an employer's authority to require equitable allocation of tips placed in a collective tip box for those employees providing service to the customer.

The appellate court found no decisional or statutory authority prohibiting an employer from allowing a service employee to keep a portion of the collective tip, in proportion to the amount of hours worked, merely because the employee also has limited supervisory duties. This directly contradicts a number of opinion letters issued by the Division of Labor Standards Enforcement (Labor Commissioner).

Companies are cautioned to review their tip-pooling arrangements carefully.  California laws differ substantially from federal laws and failure to comply with the law can result in significant losses.