The New York State Court of Appeals recently offered valuable guidance on whether supervisors may participate in tip pools under state law. The issue arose from a federal lawsuit involving Starbuck Corporation’s written tip pooling policy, which allows both baristas and shift supervisors to share in customer tips.
New York’s tip pooling statute, which the court acknowledged was not a “model of clarity,” states that:
"No employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee. . . . Nothing in this subdivision shall be construed as affecting the . . . sharing of tips by a waiter with a busboy or similar employee."
The specific question posed to the New York appeals court in Barenboim v. Starbucks Corp. was what factors determine whether an employee is eligible or ineligible to receive distributions from an employer-mandated tip-splitting arrangement?
The court ultimately concluded that employees who are "granted meaningful authority or control over subordinates" are not eligible to receive distributions from a tip pool under New York law. The opinion offers several useful examples of what would be considered “meaningful authority,” including the ability to discipline subordinates; assisting in performance evaluations or participating in the process of hiring or terminating employees; and having input in the creation of employee work schedules.
“In sum, an employee whose personal service to patrons is a principal or regular part of his or her duties may participate in an employer-mandated tip allocation arrangement under Labor Law § 196-d, even if that employee possesses limited supervisory responsibilities. But an employee granted meaningful authority or control over subordinates can no longer be considered similar to waiters and busboys within the meaning of section 196-d and, consequently, is not eligible to participate in a tip pool,” the court further explained.