It might be illegal, but it wasn’t stealing

Starbucks’ headline-making brand recreation is a bit tarnished today by an adverse court ruling. As decided in California, the company owes baristas about a hundred million dollars in tips that were distributed to shift supervisors and managers. The coverage makes it look like corporate was stealing from their workers. The L. A. Times, for example, leads by saying that “Starbucks got caught with its hand in the tip jar.”

The practice might have been illegal under California law, but it wasn’t stealing. If baristas (oops, I mean “partners”) didn’t like the practice they were free to work elsewhere or renegotiate terms. It’s also a sensible way to do business: if supervisors spend most of their time doing the work of baristas and cashiers, there’s no reason for them not to get tipped out with the other workers. Restaurants with on-the-floor managers who serve tables do exactly the same thing.

Assuming Starbucks’ compensation model is effective, this ruling won’t change much. It’s a one-time bonus for baristas who get to take advantage of a stupid law and a one-time hit for the corporation that’s getting nailed by it. It could lead to raises for supervisors to compensate for lost tips and will likely slow down pay increases for non-management positions. It doesn’t do much of anything to change incentives, except perhaps to make managers less invested in running fast, friendly stores. This isn’t a victory for workers’ rights; it’s a forced replacement of a business model that was working well to another, possibly less efficient one demanded by court decree.


28 thoughts on “It might be illegal, but it wasn’t stealing”

  1. If the baristas had the legal right to it, and they did not get it, then yes it is by definition stealing.

    You might argue that this “right” to the tips is simply a legal construct. So, I would argue, are all property rights.

    If you argue that managers who do a lot of barista work have some moral right to the tip jar because they do that work….well, that’s a decent argument. One might argue that it’s simply one among many. Another argument might be that managers and supervisors get paid more so that they don’t have to depend on tips as part of their income.

    I don’t have a strong investment in this issue and you may be right about the efficiencies. I guess I just don’t get your moral outrage at this ruling. What – in your book – would qualify as “a victory for workers’ rights”? Or is anything where the law forces a change in the business model that the market would not demand by definition a bad thing?

  2. Ben, I’m not outraged, I just think the way the ruling is portrayed in the media is dumb. Workers knew what they were contracting for and agreed to the pay system; in the long-run, wages will adjust to the mandated tip system and employees aren’t really going to be any better off. Starbucks’ system worked, encouraging management to get its’ hands dirty and work on all aspects of the store. One guy was able to change it and score big money because of a law that was made to apply to businesses without such blurry lines between management and regular employees.

    If Starbucks was redistributing tip money in secret, or not giving workers’ their full share, or violating their contracts in some other way, then stopping those abuses would be victories for workers’ rights. This, however, is just a feel good court case that doesn’t really accomplish anything.

  3. Actually, in many states it’s illegal for managers to take tips, even if they do wait tables. I know there are some places where managers are part time and wait tables in the same restaurant part time and keep the tips. However in all the restaurants I’ve worked, if a manager got behind the bar or picked up a table, they either refused tips or passed them on to other servers/bartenders. In my experience, though, the managers were all salaried.

  4. Again, I’m not saying anything about whether Starbucks had a good business model. But I don’t see the difference between the situations you classify as genuine abuse of workers and this case.

    “Not giving workers their full share.” How do you define “full share”? Clearly you define it in a way differently than the California courts. On what basis?

    “Violating their contracts in some other way.” So a violation of their contract rights is abuse but a violation of their statutory rights isn’t?

    You’re saying one guy scored big money. Was it a class action or a single plaintiff lawsuit?

    Ultimately, if the flaw’s in the law, I’ve no doubt that Starbucks has the clout to lobby to change it.

  5. I’d argue this from a different angle: this was fraud against the consumer.

    Customers left the tip money not for managers, but specifically for the employees who waited on them. Nobody out there wants to tip managers and if it becomes well known that a large portion of the money going into the tip jar is making its way up the chain of command, people are going to stop leaving money. For the corporation to take money left for the bottom rung employees and redistribute it to the managers is deceitful and in direct contradiction to the wishes and expectations of the customers. The court re-directing the money to its proper recipients is right from the customer’s vantage point.

    Now, if they want to do this, they’re free to put a sign over the tip jar explaining where that money is going and that it’s not in fact going to the people giving you coffee. I suspect tipping would drop appreciably. Come to think of it, that would actually be a great idea in general. I’d like to know if my money is going to waiter, or to a bus boy, or to a chef, or to a maitre d’… the proportions involved could impact my tipping somewhat dramatically.

  6. lsmsrbls, speaking from experience, that’s not always the case.

    Ben, by “full share” I mean giving them their agreed upon portion of all the tips that were donated. As for statutory rights, I have no opinion on whether or not the court properly applied California’s law. What I’m saying is that the statutory rights, if they are being applied correctly, are interfering with contracts that were freely entered into in a business model that the law was not designed for. Thus, it’s a stupid, outdated law.

    RD, that’s a fair point. But it could be easily turned around. At Starbucks, the average customer probably can’t tell the difference between a barista and a shift supervisor, because they’re doing basically the same thing a lot of the time. So you might be thinking you’re tipping the person helping, but actually not. It’s a fluid boundary that seems to make a lot of sense, but the law doesn’t really recognize it.

  7. My coffee shop experience is limited (I drink neither coffee, nor tea, so I don’t really have much reason to spend time there). If that’s the case, then obviously my comments wouldn’t apply.

    I was really thinking of restaurants where a manager, at least as far as I know, wouldn’t have a direct hand in getting me my food and hence would be taking money from me that was intended to go to my server.

    I wish I liked coffee.

  8. California Labor law 351 states that, No employer or agent shall COLLECT, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron.

    Starbucks, like many other businesses, is implementing an illegal policy that requires that all tips must be collected and shared.

    If Starbucks had not been allowed to require that all tips be collected and shared, there would not have been an issue when some mandagers received tips. The issue is not that managers are receiving tips, the issue is, Starbucks is illegally collecting tips and controlling them.

    Employers have errantly been allowed to require tip pooling even though California’s labor laws specifically prohibit employers from collecting tips. The only reason so many restaurants are being allowed to require that tips be pooled or collected is because business owners have been successful at corrupting our judicial system.

    While California’s laws clearly state that employers are prohibited from collecting tips, California’a judges say there’s nothing illegal about it. California’a judges say California Labor Code Section 351 allows involuntary tip pooling and thus employers may collect tips.

    The thing is, there can be no involuntary collecting of tips without it being quite evident that the employer who is initiating such pooling is collecting tips and in so doing is violating state law.

    It is my opinion that several California judges have simply been paid off to lie about California’s Labor laws.

    The law says that employer can’t collect any tips and judges say their not collecting tips when they force workers to placr their tips into a plastic box with the word “TIP” written on it.

    The law says that employers can’t take their employee’s tips and yet judges say their not taking the tips when they collect them and give them to their managers.

    The law says that neither an employer nor his agent may receive tips and yet only one judges finally stands up and says enough is enough.

  9. Gary – The law doesn’t always work that way. While the words of the statute may list “collect” as one of the barred employer practices, it’s not inherently clear what that means, and that ambiguity leaves room for different interpretation which can explain the judicial tendencies more easily than corruption does.

    The list of barred activities is that no employer shall “collect, take or receive” which sounds to me, considering all three words, like they’re targeting employers who gather AND keep a share of the tips for themselves. At least, that’s what ‘take’ and ‘receive’ are hinting at, and that’s certainly a viable interpretation of “collect” (see also the concept of ‘collect[ing]’ taxes).

    The problem with laws is that while they may seem perfectly clear at first blush, many people may read them slightly differently, and those slight variations can have a dramatic outcome on the meaning and enforcement of the law. Judges are tasked with the duty of interpreting what those words means, and they do so with a variety of tools including the thoughts of previous judges on the same law, statutory construction, legislative history, dictionaries (both legal and non-legal) and outside experts.

    It’s unlikely, as you surmise, that all the judges have been “bought off” or “corrupted.” What’s more likely is that the judges merely came to a different conclusion then you did as to the meaning of this word and are interpreting the law as attempting to ban employers from taxing the employee’s tips, which seems like a more sensible goal political than one which merely bans employers from temporarily collecting employees tips.

    For what it’s worth, that’s probably the way I’d read it too.

  10. So what you are saying is that when California laws state that No employer shall collect, take or receive any gratuity, employers are allowed to collect and control the gratuities as long as they don’t directly put them in their pocket?

    It sounds like an excuse a little kid would come up with after he’s stolen another kids lunch box. “I didn’t take Johny’s lunch, I just shared it with my friends. They ate it, not me.”

    So what you are saying is that when state laws instruct that employers cannot collect, take of receive any gratuities, such laws really don’t prohibit employers from collecting and taking the tips unless they put the money directly into their pocket. It’s ok if they use the money to buy a new car or use the money to pay their employees who didn’t receive tips.

    I will not believe that a judge of ordinary intelligence would mistakenly interpret the word “take” simply to mean directly put in one’s own pocket.

    Employers are forcing their workers to pool their tips into one fund where the employer will control who recevies a share of the money, and how much each will receive.

    Can you imagine if I did that to one of Californis’s judges. Imagine me forcing a judge to give over the money in his billfold to me so I can determine who will receive the money. While I could argue until I was blue in the face that I did not keep any of his money, he is not going to let me off the hook simply because I didn’t keep any of it. It wouldn’t matter if I explained that I gave his money to my barber. It wouldn’t matter if I explained that I gave his money to charity. The agrument that I did not keep his money would not exhonerate me.

    I think it is more than apparent that judgess in California are being bribed by restaurant owners. While state laws clearly state that No employer shall collect, take or receive any gratuites paid given or left for an employee, seversal judges have ruled that forcing workers to turn their gratuities over to the employer so he can share them with workers of his choosing is not the collecting or taking of gratuities California’s laws were enacted to prohibit.

    Show me one definition of the word “take” that explains the one must keep what has been taken in order to take. If I collect the money in your dresser drawer and use it to pay my gardener, have I not taken your money?

    If I collect the sprinkler heads in your yard and give them to your neighbor have I not taken your sprinkler heads?

    How can you interpret the rulings of these judges as anything other than corruption.

    Give me some logical reason to believe that judges in California are not simply lying to rule in favor of business owners.

  11. Starbucks was stealing tips just like the restaurants who require tip pooling are stealing tips. They intimidated their employees into putting their tips into a box where management will control the money. The empoyees who were given tips were threatenedd with termination if they didn’t put their tips into the plastic tip box. After all tips were placed into the little plastic box, the employee who had put his tips into the box had no say over what would become of his tip.

    Don’t tell me that’s not stealing.

  12. Give me a logical reason as to why judges in California are lying in favor business owners? You say they’re being bribed? Do you have ANY evidence to back that up? Do you think ALL of the judges are being bribed? Doesn’t that seem kind of ludicrous?

    The 9th Circuit, the federal judicial circuit that covers California, is the most liberal circuit in the country and presumably most supportive of employees’ rights. This case was in state, not federal court, but I have a hard time believing the state court judges are going to be much different politically.

    As I said above, one of a judge’s tasks is interpreting the meanings of words which, although they may appear clear to you, are not un-ambiguous. Judges, according to you, repeatedly and unanimously have decided that you are wrong about your interpretation of these words. I haven’t read the actual decisions, but I can assume that they give some discussion to this point. Maybe I should try to look it up…

  13. The customers are giving tips because they believe it is going to the people who prepared their drink. If the company wants to give their managers a bonus, they should get the money from their bank account. Not the employee tip jar

  14. Why have our people become so anesthetised to blatant corruption within our judicial system?

    Our judges no longer care about truth and justice. They only care about who will pay them the most to overstep their power?

    What will become of our judicial system when obviously there is no accountability what-so-ever?

    Our judges can throw out the most outragous lies and get away with it.

    Collecting doesn’t mean collecting. Taking doesn’t mean taking. Now pay me some of those tips I let you steal.

    “The problem with laws is that while they may seem perfectly clear at first blush, many people may read them slightly differently”.

    We are not talking about judges reading labor laws slightly differently. We are talking about deliberately twisting the law around to the point that it protects the thieves.

    While Californi labor laws state clearly that

    “No employer or agent shall COLLECT, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron”

    A hand full of blatantly corrupt judges actually expect us to believe that California’s labor laws specifically allow employers to confiscate and appropriate the customer’s tips without any consent from the customer. Didn’t these guys have to go to college? Why is it so hard to understand that you cannot consiscate and appropriate someone else’s property without first obtaining somekind of consent?

    Should being a judge allow one to steal another’s property?

    I am utterly ashamed of this country. How many other lies are they shoving down our throat?

  15. RD, it could either mean that you are just as corrupt as the judges, or it could mean that you are to erragant to admit that you are wrong.

    If I take the money in yor billfold and use it to pay my gardener, am I not taking your money?

    What these lying judges are suggesting is that an employer may take his worker’s tips and use them to pay workers who did not directly receive tips from customers. Employers do not have to ask the employee for permission to take his tips, they can simply make it a condition of employment and deny employment to anyone who disaproves of their employer stealing their tips.

    Do you really believe that a judge would not consider it taking if someone threatened a judge into giving up his money so that this other person could determine how it was spent?

  16. RD,

    Why is that I would be locked up if I were to intimidate or theaten someone into giving over his money to me and yet when a business onwer does the same thing, judges say it’s legal?

    Yes, I know for a fact that judges are taking pay offs from business owners.

    There is no logical reason why an action that would normally be considered a crime if commited by am ordinary person is being ruled as legal when applied to business owners.

  17. Yes, I know for a fact that judges are taking pay offs from business owners.

    You know for a fact? I suspect you don’t understand the meaning of the word “fact” (or possibly the meaning of the word “know”). You’re merely making an assumption because you didn’t like the legal outcome.

    This sort of silly evidenceless presumption of corruption, made without real supporting logic, is dangerous to the entire judicial system.

    Plus, it’s exhausting.

  18. While you say I am making assumptions, just look at the way the court’s condoning of employer mandated tip pooling has now resulted in judges having to assume who customers are tipping.

    How can judges now determine who should be included in an employer mandated tip pool when other judges have ruled that employers should be allowed to take the tips away from those workers who actually received them directly from customers so that the tips may be shared among those the customer intended to tip. Why are judges assuming that when a customers gives a worker a tip, the customer really wants others to share in his tip?

    While judges assuming who customers accually intend to tip adversely affects the income of those workers whom customers physically present tips, my assumption does not affect the incomes of millions of workers in such a manner. My assumption that judges are lying for payoffs doesn’t effect the constitutional rights of anyone. Last time I checked there was nothing in our constitution protecting the right of judges to rule in favor of the highest bidder. However, our constitution does guarantee our citizens liberty, which in turn, should mean that customers are the only ones authorized to determine who is entitled to their private property, their tip.

    Judges are actully assuming that customers want to tip more people and subsequenly more money. Why would a customer want to tip every worker at a restaurant. Most customers only want to tip one or maybe two workers. It’s expensive to tip everyone who provides somekind of service. And yet, several judges in California seem to want customers to believe that every workers who provides service is legally entitled to their tip if they should decide to give a tip. These judges actually want customers to beleive that it is not the customer’s right to determine who they intend to tip but instead it is the right of the courts to determine, for customers, who they intend to tip.

    Tell me why judges would suggest such a ridiculous notion unless, as I suggest, they are doing so simply in an effort to condone their rulings that employers should be allowed to confiscate and appropriate the customer’s tip in a manner more financially advantagous to business owners.

  19. Why can’t customers tip who-ever they want so that those who are tipped can actually be protected to the tips they are given. If employer mandated tip pooling were properly prohibited, there would be no question as to who customer’s are intending to tip. There would be no reason for judges to assume that they can read the minds of every single customer.

    And yet, when judges rule that labor laws do not prohibit employers from confiscating all tips so the they can be shared among workers, they are using assumptions to condone such rulings. Their assumption is that customers are not really tipping the person to whom they present a tip, instead customers are tipping a group of workers whom the courts, for years, have been unable to clearly define. The result is, instead of a workers being protected to tips you give them, no employee is protected to tips you give them, due to the fact there is no way to substantiate who each and every customer intends to tip.

    What these judges are saying is, we don’t know who the customer intended to tip, however, we are going to let employers take the tips away from an employee who was given a tip. While we understand there is no way we can correctly assertain who each and every customer intended to tip, business owners want to be able to take the tips away from an employee who is presented a tip, so we are going to let them take their tips away from them. Who cares if customers are deprived their right to determine, for themselves, who they intend to tip, business owners give us free meals and other perks.

  20. One last comment.

    Why are judges assuming that customers want their tip shared among all those who provide service when customers have the ability to share their tips themselves? Why can’t the customer’s actions in presenting a tip serve as evidense as to who the customer intended to tip. If you give a worker a tip, WHAT, you really didn’t want him or her to have it? If you give serveral workers a tip, then obviously you wanted to share your tip. What’s so hard to understand about customer’s deciding for themselves who they intend to tip.

    Why can’t judges grasp this basic logic? Are they really that stupid?

  21. I have been looking for an answer to a problem that I have and I hope someone here can help me out. I start a management position at a small, independantly owned cafe in a week. I have worked there as a barista for over two years. While I have been given a raise, it is not enough to keep me from taking a very deep paycut if I do not collect tips. I will be on the floor working as a barista for the majority of the time and will be tending to management duties for about 25 percent of the time. The owner of the shop assured me that my income won’t take a hit as I will still be collecting tips. I am extremely uncomfortable with this. Is what the owner is proposing illegal? I would rather ask for a higher wage and leave the tips for the lower level employees but my boss is tight with the purse strings. I have one week to figure this out.

  22. Want to control your own tip receipts? Sign up at Ziptip is a new service that allows your customers to tip you using their smart phones. It is just launching (summer 2011) and already signing up tippees at Simply sign up and show your customers your Ziptip Medallion (it’s just like a business card but doesn’t share any confidential info about you and contains the info Tippers need to tip you with their phones). You can get the Medallions at too. Start controlling your own tips – they belong to you!

  23. A poorly written and researched article. If the author had spent just a little time doing research then the FLSA guidelines prohibiting tip distribution to managers. It is not only illegal, it is stealing and it violates federal law…that is why Starbucks lost.

  24. OK, here we go. I am GM/(25+ years of bartending experience) of a restaurant. The restaurant had a banquet lunch one Friday. (Not open for lunch, M-F) Hence, we did not have a bartender scheduled. Being that we did not know how much business was going to take place from the bar. I did come in and set up the bar. It ends up that the restaurant & I were very busy. Which was great. But, in the end. When TIPS were distributed, one of the waiters said that MANAGERS could not accept tips. The thing is, they would of had to tip out a bartender if he was working. I WAS NOT STEALING OR SHORT CHANGING THEM! SHOULD I HAVE BEEN TIPPED? I think so. I did the job. What more should be said? I do hope to hear from you soon. Thank you for reading. GREGORY BARDAKOS

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