Starbucks to pay $100 million in tips
SAN DIEGO (AP) - March 21, 2008 San Diego Superior Court Judge Patricia Cowett also issued an
injunction that prevents Starbucks' shift supervisors from sharing
in future tips, saying state law prohibits managers and supervisors
from sharing in employee gratuities.
Starbucks spokeswoman Valerie O'Neil said the company planned an
immediate appeal of the ruling, calling it "fundamentally unfair
and beyond all common sense and reason."
The lawsuit was filed in October 2004 by Jou Chou, a former
Starbucks barista in La Jolla, who complained shift supervisors
were sharing in employee tips.
The lawsuit gained ground in 2006 when it was granted
class-action status, allowing the suit to go forward for as many as
100,000 former and current baristas in the coffee chain's
California stores.
It was not immediately clear how many current and former
employees are affected by the ruling.
"I feel vindicated," Chou said in a written statement released
by attorneys. "Tips really help those receiving the lowest wages.
I think Starbucks should pay shift supervisors higher wages instead
of taking money from the tip pool."
California is Starbucks' largest U.S. market, with 2,460 stores
as of Jan. 8, the latest count available. The Seattle-based company
has more than 11,000 stores nationwide.
Starbucks employs more than 135,000 baristas in the U.S. The
company did not immediately respond to a request for a head count
in California.
The judgment comes as Starbucks is struggling to revive its U.S.
business, where store traffic has slipped amid a sagging economy,
rising energy and dairy costs, and growing competition from cheaper
rivals.
The company's stock has slid more than 50 percent since late
2006, when it was trading close to $40 a share. Starbucks shares
rose 3 cents to $17.53 Thursday.
Starbucks earned more than $672 million on revenue of $9.4
billion during its 2007 fiscal year, which ended Sept. 30.
The judge ordered Starbucks to pay $87 million in back tips,
plus interest of $19 million, bringing the total judgment to about
$106 million.
The company said it planned to ask the court to stay the ruling
while the appeal is pending.
"The decision today, in our view, represents an extreme example
of an abuse of the class-action procedures in California's
courts," O'Neil said.
The coffee company also took issue with the brevity of the
judge's ruling, which was only four paragraphs, saying she failed
to address the unfairness to shift supervisors.
"This case was filed by a single former barista and, despite
Starbucks request, the interests of the shift supervisors were not
represented in litigation," O'Neil said.
But attorney Laura Ho, who tried the baristas case, said the
court's verdict follows state law.
"Starbucks illegally took a huge amount of money from the tip
pool to pay shift supervisors, rather than paying them out of its
own pocket. The court's verdict rightfully restores that money to
the baristas," Ho said.
---
AP Business Writer Elizabeth M. Gillespie in Seattle contributed
to this report.