Court reverses Starbucks tip sharing ruling

updated 10:20 a.m. ET June 4, 2009

SAN DIEGO - A California appeals court reversed a ruling that ordered Starbucks Corp. to pay millions in restitution to baristas who had to share their tips with shift supervisors.

The 4th District Court of Appeal in San Diego ruled Tuesday that supervisors "essentially perform the same job as baristas," so they should get their fair share of collective tip jars.

In 2004, former barista Jou Chau filed a class-action lawsuit against the Seattle-based coffee giant on behalf of more than 100,000 current and former baristas in California.

San Diego County Superior Court Judge Patricia Cowett ruled in their favor last year and awarded $86 million in restitution plus about $20 million in interest.

Starbucks appealed, calling the decision "fundamentally unfair and beyond all common sense and reason."

The company argued that its supervisors spend as much as 95 percent of their time performing the same duties as baristas, including taking orders and making coffee, and can't hire, discipline or terminate the staff they supervise.

Attorneys for the baristas said they plan to appeal the decision to the California Supreme Court.

"Up to this point, every court that has addressed this issue has found that an employer cannot pay supervisors from a tip pool. This is the first case that goes in a different direction," said David Lowe, the baristas' lawyer.

Lowe said the state labor code prohibits an employer or agent from getting tips left for employees. The legal definition of an agent is anyone who has authority to supervise, direct or control workers, he said.

The company released a statement saying it was pleased with the ruling, which "validates our long-standing tip policy."

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