Starbucks Decision Addresses Tip-Splitting Under New York Law

The tip splitting policy of Starbucks coffee shops in New York was reviewed by the New York Court of Appeals in a decision that was issued yesterday. In the Starbucks case, the New York Court of Appeals explained that employer-mandated tip splitting should be limited to employees who, like waiters and busboys, are ordinarily engaged in personal customer service, a rule that comports with the “expectations of the reasonable customer.” The Court held that “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.” Attorneys for workers and restaurants should take careful note of this decision as it is the best explanation of the law to date by a court on the important issue of managers participating in a restaurant tip pool.