On Thursday, November 21st, 2013 the United States Court of Appeals upheld the New York Court of Appeal's decision allowing low level supervisors to participate in tip sharing.
The Alliance previously submitted an amicus brief in this case and was proud to report in April, that the judges ruled in favor of our position and strongly against the plaintiffs.
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Fox Rothschild up ATTORNEYS AT LAW NOVEMBER 2013 NYC HOSPITALITY ALLIANCE HOSPITALITY SECOND CIRCUIT PERMITS LOW LEVEL SUPERVISORS To PARTICIPATE IN TIP SHARING By Glenn S. Grindlinger On November 21, 2013, in Barenboim v. Starbucks Corp., No. 10-4912 (2d. Cir. Nov. 21, 2013), the United States Court of Appeals for the Second Circuit upheld the practice of requiring rank and file employees to share their tips with low level supervisors. The Court's decision, which was widely expected in this closely-followed case, should bring some relief to New York employers in the hospitality industry. In Barenboim, a class of baristas who worked at Starbucks locations throughout New York alleged that Starbucks' practice of requiring baristas to share their tips with employees classified as "shift supervisors" violated New York Labor Law § 196-d (Section 196-d). Both baristas and shift supervisors are hourly wage employees who have a primary responsibility of serving food and beverages to customers. However, shift supervisors — as their job title implies — also have some supervisory responsibilities. They assign baristas to particular positions during their shifts, direct the flow of customers, provide feedback to baristas about their performance, coordinate breaks and schedules, open and close stores, change the cash register tills and on occasion make bank deposits. Notably, shift supervisors do not participate in the process of hiring and firing employees. After discovery, Starbucks moved for summary judgment on the grounds that shift supervisors have the primary responsibility of serving customers; as such, they are not managerial employees and therefore under Section 196-d, Starbucks can compel baristas to share tips with shift supervisors. The district court granted Starbucks' motion and rejected Barenboim's assertion that Section 196-d expressly prohibits employers from requiring service employees to share tips with anyone who has any supervisory authority no matter how small or minor. Barenboim appealed the district court's decision to the Second Circuit. The Second Circuit, in turn, certified the issue to the New York Court of Appeals. On May 26, 2013, the New York Court of Appeals issued its decision finding that employees could be compelled to share their tips with an individual who has a modicum degree of supervisory authority provided that individual's primary duty was the servicing of customers. However, the New York Court of Appeals recognized that "there comes a point at which the degree of managerial responsibility becomes so substantial that the individual can no longer be fairly characterized as an employee similar to the general wait staff within the meaning of [Section 196-„ With the guidance of the New York Court of Appeal's decision, the Second Circuit reviewed the actual duties of the shift supervisors to determine if the shift supervisors had such substantial managerial responsibility over the baristas. The Second Circuit easily found that they did not and therefore it upheld California Colorado Connecticut Delaware District of Columbia Florida Nevada New Jersey New York Pennsylvania www.foxrothschild.com HOSPITALITY • NOVEMBER201 3 the award of summary judgment to Starbucks. This case is welcome news for New York hospitality employers. The decision makes it clear that supervisors who direct workflow, assign positions, provide feedback to employees, coordinate breaks and schedules, open and close stores, and handle bank transactions may still participate in a tip pool and employees can be compelled to share their tips with such individuals provided the supervisors have a primary role of servicing customers and they do not have a role in hiring, firing or setting wage rates. However, the decision is not a panacea. Oddly, the Second Circuit issued the decision as a "Summary Order," which means it does not have precedential effect. As such, it may be cited by parties in court proceedings, but lower courts (and subsequent Second Circuit panels) are not required to follow it. Nevertheless, the decision is still good news for hospitality employers and it provided additional guidance for employers on which employees can participate in tip pools and share gratuities. For more information about this Alert, please contact Glenn Grindlinger at email@example.com, or another member of the Fox Rothschild New York Labor & Employment Department. Visit us on the web at www.foxrothschild.com. 4 Fox Rothschild LLP ATTORNEYS AT LAW Attorney Advertisement © 2013 Fox Rothschild LLP. All rights reserved. All content of this publication is the property and copyright of Fox Rothschild LLP and may not be reproduced in any format without prior express permission. Contact firstname.lastname@example.org for more information or to seek permission to reproduce content. This publication is intended for general information purposes only. It does not constitute legal advice. The reader should consult with knowledgeable legal counsel to determine how applicable laws apply to specific facts and situations. This publication is based on the most current information at the time it was written. Since it is possible that the laws or other circumstances may have changed since publication, please call us to discuss any action you may be considering as a result of reading this publication. California Colorado Connecticut Delaware District of Columbia Florida Nevada Jew Jersey New York Pennsylvania www.foxrothschild.com