California law prohibits managers and supervisors from sharing in employee gratuities. However, for years, that has happened at Starbucks coffee shops. As we mentioned yesterday, Starbucks was been found liable to 135,000 of its California baristas for more than $100 million in back tips and interest ($87 million in tips and $19 million in interst) that the coffee chain paid to shift supervisors. The parties have now put out some comments:
- Starbucks spokeswoman Valerie O'Neil said the company planned an immediate appeal of the ruling, calling it "fundamentally unfair and beyond all common sense and reason ... The decision today, in our view, represents an extreme example of an abuse of the class-action procedures in California's courts."
- Plaintiff Jou Chou said: "I feel vindicated ... Tips really help those receiving the lowest wages. I think Starbucks should pay shift supervisors higher wages instead of taking money from the tip pool."
- The coffee company 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. "This case was filed by a single former barista and, despite Starbucks request, the interests of the shift supervisors were not represented in litigation," O'Neil said.
- Attorney Laura Ho, who tried the case for the plaintiffs, said the court's verdict follows state law. "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."
Essentially, Starbucks boosted its profits by about 1.6% annually (Starbucks earned more than $672 million on revenue of $9.4 billion during its 2007 fiscal year), by suppressing the wages of its shift supervisors and making up the difference by letting them dip their fingers into the tip jars of the employees who are entitled to the tips, as a matter of mandatory corporate policy. That sort of ripoff is exactly why class actions are permitted, because no one barista would be able to find the resources to make it feasible to challenge such a policy. The class action remedy merely allows the employees' claims, which are practically identical to one another, to be aggregated. And now the court has ordered Starbucks to pay their illegal savings back. We find that quite reasonable and have no trouble seeing how common sense permits such a fair redistribution. What strikes us as unfair is Starbucks complaining, after it failed to represent the interests of its management/supervisory employees, that those interests weren't represented.