• Tip Pooling Clarified by New York's Top Court
  • July 5, 2013
  • Law Firm: Clifton Budd DeMaria LLP - New York Office
  • The New York Court of Appeals issued an important decision relating to tip pools. The case involved shift supervisors and assistant store managers who perform similar entry-level customer service roles as front-line baristas who take orders, make coffee, and operate the cash registers. The Court held that shift supervisors are not excluded from sharing in the common tip pool with such entry-level baristas under New York Labor Law Section 196-d. Like baristas, shift supervisors are paid on a part-time, hourly basis with just “some” supervisory duties like assigning baristas to particular positions during their shifts, directing the flow of customers, and providing baristas with feedback as to their performance. By contrast, assistant store managers have greater managerial and supervisory authority in interviewing applicants, assigning work shifts, and evaluating employee performance, and therefore may not share in common tip pools under New York Labor Law Section 196-d. Assistant store managers are also full-time employees who receive a salary and are eligible for quarterly bonuses and certain benefits like holiday and sick pay. In making their ruling, the Court found instructive a previous New York State Department of Labor (“NYSDOL”) Wage Order making clear that ability to participate in a tip pool shall be based on duties and not titles.

    In Barenboim v. Starbucks Corp., the Court draws the line of tip splitting at meaningful or significant authority or control over subordinates rather than final authority. In other words, the power to hire and fire is not the exclusive test. Meaningful authority includes the ability to discipline, assist in performance evaluations, participate in the process of hiring and firing, and provide input in the creation of work schedules which influences the number and timing of hours and compensation. Employees who maintain significant or meaningful authority may not participate in tip sharing. However, where an employee’s personal service to patrons is a “principal or regular part of his or her duties,” she or he may participate in an employer mandated tip allocation arrangement under New York Labor Law Section 196-d, even if that employee possesses limited supervisory responsibilities.

    Employers that utilize tip pooling must carefully examine the job duties and responsibilities of all the employees involved to ensure compliance with New York Labor Law.