Barenboim v. starbucks, Winans v. Starbucks Corp. , 698 F.3d 104 ( 2012 )

10-4912-cv, 11-3199-cv,
Barenboim v. starbucks, Winans v. Starbucks Corp.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2011
(Argued: August 30, 2012 Decided: October 23, 2012)
Docket No. 10-4912-cv
JEANA BARENBOIM, JOSE ORTIZ, on behalf of themselves and all others similarly situated,
Plaintiffs-Appellants,
—v.—
STARBUCKS CORPORATION,
Defendant-Appellee.
_________________
Docket No. 11-3199-cv
EUGENE WINANS, MICHAEL BIENTHCS, REYNOLDS MANGONES, MATTHEW TABER,
KRISTEN TOMAINO, on behalf of themselves and all others similarly situated,
Plaintiffs-Appellants,
KENNISHA LAWRENCE,
Plaintiff,
—v.—
STARBUCKS CORPORATION,
Defendant-Appellee.
_________________
Before:
WINTER, RAGGI, and LIVINGSTON, Circuit Judges
______
1
Appeals heard in tandem from awards of summary judgment in favor of defendant
Starbucks Corporation in the United States District Court for the Southern District of New
York (Laura Taylor Swain, Judge). In No. 10-4912-cv, plaintiffs, representing a putative
class of Starbucks baristas, contend that the district court erred in failing to construe New
York Labor Law § 196-d to prohibit Starbucks from distributing pooled tips to shift
supervisors, who are purportedly Starbucks “agent[s],” as that word is used in the statute.
In No. 11-3199-cv, plaintiffs, representing a putative class of Starbucks Assistant Store
Managers (“ASMs”), contend that the district court erred in construing § 196-d as not
requiring Starbucks to include ASMs in its tip pools. Because these cases turn on the proper
construction of New York Labor Law § 196-d, and the New York Court of Appeals has yet
to construe the meaning of the word “agents” under the statute or to decide whether an
employer may exclude a tip-earning employee from receiving distributions from a common
tip pool, we defer decision and certify these questions to the New York Court of Appeals.
_____________________
SHANNON LISS-RIORDAN (Daniel Maimon Kirschenbaum, Joseph, Herzfeld,
Hester & Kirschenbaum LLP, New York, New York, on the brief),
Lichten & Liss-Riordan, P.C., Boston, Massachusetts, for Jeana
Barenboim and Jose Ortiz.
LEWIS M. STEEL (Paul W. Mollica, Adam T. Klein, on the brief), Outten &
Golden LLP, New York, New York, for Eugene Winans, Michael
Bienthcs, Reynolds Mangones, Matthew Taber, and Kristen Tomaino.
REX S. HEINKE (Samidh Guha, Gregory W. Knopp, Daniel L. Nash, Nathan
J. Oleson, Johanna R. Shargel, on the brief), Akin Gump Strauss
Hauer & Feld LLP, Washington, D.C., for Defendant-Appellee.
2
REENA RAGGI, Circuit Judge:
These appeals, heard in tandem, challenge awards of summary judgment entered in
the United States District Court for the Southern District of New York (Laura Taylor Swain,
Judge), in favor of defendant Starbucks Corporation on plaintiffs’ complaints that Starbucks
violates New York Labor Law § 196-d in the distribution of tip pools maintained at stores
in New York State. In each store, Starbucks employs four types of workers. At the bottom
of a Starbucks store’s hierarchy are “baristas,” the line workers responsible for taking
customers’ orders and serving the company’s coffee- and tea-based drinks. Immediately
above baristas are “shift supervisors,” who are principally responsible for serving customers,
but who also enjoy limited supervisory responsibilities. Above the shift supervisors are
“assistant store managers” (“ASMs”), who serve as deputies to the highest-ranking
employees, the store managers.
Each Starbucks store posts a plexiglass box at the counter where customers may leave
tips. Starbucks policy provides for these tips to be pooled and distributed among the baristas
and shift supervisors. Starbucks does not permit its store managers or ASMs to receive any
share of a tip pool.
In the first appeal before us, Barenboim v. Starbucks Corp., No. 10-4912-cv, a
putative class of baristas sued Starbucks, contending that shift supervisors are not permitted
to receive distributions from a store’s tip pool because shift supervisors are Starbucks
“agent[s]” who may not “demand or accept, directly or indirectly, any part of the gratuities,
received by an employee, or retain any part of a gratuity or of any charge purported to be a
gratuity for an employee.” N.Y. Lab. Law § 196-d. In the second appeal, Winans v.
3
Starbucks Corp., No. 11-3199-cv, a putative class of ASMs sued Starbucks, claiming that
they are not Starbucks agents ineligible to receive tips pursuant to § 196-d, and therefore
could not be excluded from sharing in a tip pool to which their own customer service yields
gratuities. In awarding summary judgment in favor of Starbucks in both cases, the district
court ruled as a matter of law that there was no genuine dispute of material fact that shift
supervisors are not Starbucks agents under N.Y. Lab. Law § 196-d, see In re Starbucks Emp.
Gratuity Litig., 264 F.R.D. 67, 72–73 (S.D.N.Y. 2009), and that, even if a genuine factual
dispute existed as to ASMs’ eligibility to retain gratuities, § 196-d did not afford them a
statutory right to receive distributions from Starbucks tip pools, see Winans v. Starbucks
Corp., 796 F. Supp. 2d 515, 519 (S.D.N.Y. 2011).
These appeals present two unresolved questions of New York law:
First, what types of employees are eligible to participate in a tip-pooling arrangement,
and what factors should inform a court’s consideration of eligibility? Section 196-d prohibits
an “agent,” defined elsewhere as a “supervisor,” N.Y. Lab. Law § 2(8-a), from retaining tips.
New York law does not define “supervisor.” Here, shift supervisors and ASMs both exercise
supervisory roles, although in differing degrees, and it remains unclear how many or what
kind of supervisory responsibilities are dispositive to the § 196-d analysis. Moreover,
although the statute permits employers to require tip sharing by “a waiter with a busboy or
similar employee,” id. § 196-d, it is unclear whether an employer may mandate a tip-pooling
arrangement between a waiter and another customer-service employee of higher rank.
Second, if an employee is not an agent and therefore is eligible to receive tips, may
an employer deny him tip-pool distributions even though customers paid gratuities into the
4
pool in compensation for his service? Although § 196-d establishes who is ineligible to
receive a share of tips, New York law does not clearly state whether an employer may
exclude an otherwise eligible tip-earning employee from any share of the business’s tip pool.
Because these unresolved questions implicate significant New York state interests,
and are determinative of these appeals, we defer decision and certify them to the New York
Court of Appeals.
I. Background
A. Barenboim v. Starbucks Corp., No. 10-4912-cv
Jeana Barenboim and Jose Ortiz (collectively, “Barenboim”) were formerly employed
by Starbucks as baristas in New York. As such, they were responsible for preparing food and
beverages for Starbucks customers. Baristas work on a part-time, hourly basis.
Similarly, shift supervisors, the Starbucks employees immediately senior to baristas,
are primarily responsible for serving food and beverages to customers and work on a part-
time, hourly basis. As their title indicates, however, shift supervisors also have some
supervisory responsibilities, such as assigning baristas to particular positions during their
shifts, administering break periods, directing the flow of customers, and providing feedback
to baristas about their performance. Further, shift supervisors are authorized to open and
close stores, change the cash register tills, and deposit money in the bank, but only when both
an ASM and store manager—the Starbucks employees senior to shift supervisors—are
unavailable.
Starbucks stores post tip jars next to cash registers, wherein customers regularly leave
gratuities. Once these tip jars become full, Starbucks requires that they be emptied into a
5
bag, which is then placed in the store safe. Each week, tips are tallied and then distributed
in cash to baristas and shift supervisors in proportion to the number of hours each employee
worked. Starbucks’s company-wide policy requires tips to be distributed among baristas and
shift supervisors and precludes store managers and ASMs from receiving payments from the
tip pool.
Barenboim filed this putative class action on April 3, 2008, principally alleging that
Starbucks violated various provisions of New York Labor Law by allowing shift supervisors
to participate in tip pools. See N.Y. Lab. Law §§ 193, 196-d & 198-b. Barenboim also
alleged that Starbucks illegally failed to distribute tips to barista trainees who served
customers during their training periods.
On December 16, 2009, the district court awarded summary judgment to Starbucks
and denied plaintiffs’ motions for summary judgment and class certification. It concluded
that shift supervisors are not Starbucks agents because their limited supervisory
responsibilities “do not carry the broad managerial authority or power to control employees
that courts have held to be sufficient to render an employee an ‘employer or [employer’s]
agent’ within the meaning of Section 196-d.” In re Starbucks Emp. Gratuity Litig., 264
F.R.D. at 72 (alteration in original).
The parties stipulated to dismissal of plaintiffs’ remaining claim concerning
Starbucks’s distribution of tips to barista trainees, and the district court endorsed that
stipulation on October 8, 2010 without entering a separate judgment. Plaintiffs timely
appealed on December 2, 2010. See Fed. R. App. P. 4(a)(7)(A)(ii) (permitting party 150
6
days to appeal from entry of final order if no separate judgment is entered as otherwise
required under Fed. R. Civ. P. 58(a)).
B. Winans v. Starbucks Corp., No. 11-3199-cv
Plaintiffs Eugene Winans, Michael Bienthcs, Reynolds Mangones, Matthew Taber,
and Kristen Tomaino (collectively, “Winans”) are former Starbucks ASMs. In contrast to
baristas and shift supervisors, ASMs are full-time employees who receive a salary when they
work at least 37 hours per week and are paid an hourly wage when they work less than 37
hours. Nevertheless, ASMs are “non-exempt” under the Fair Labor Standards Act (“FLSA”)
and, thus, Starbucks pays them overtime, just as it does baristas and shift supervisors.
Winans adduced evidence showing that the majority of ASMs’ time is spent serving
customers and that ASMs wear the same uniform as baristas and shift supervisors, rendering
these three groups of workers indistinguishable from each other in dealings with customers.
ASMs, however, are also responsible for managerial tasks, although the parties contest
the degree to which ASMs act as managers. Winans emphasizes that ASMs have no final
authority over management decisions. Rather, ASMs assist the store manager by conducting
preliminary interviews of job applicants, advising about employee work performance and
promotions, recommending termination of employees, disciplining employees at the store
manager’s direction, and preparing work schedules and payrolls for the store manager’s
approval. Winans also points out that, in Starbucks’s internal job descriptions, ASMs are
listed as retail store support, while only store managers are considered management, and that
the principal requirement for the ASM position is the “[a]bility to act with a ‘customer comes
7
first’ attitude and deliver customer service that meets or exceeds customer expectations.”
Winans J.A. 1554.
In response, Starbucks stresses that ASMs’ principal function is to manage the store
and its employees by participating in managerial decisionmaking with the store manager and
serving as the store manager’s deputy. Starbucks identifies its ASMs as the company’s
“bench” of future store managers; their assistance to store managers is intended to teach them
the skills necessary to manage a Starbucks store in the future. Id. at 601. Thus, Starbucks
maintains that, although they may lack final authority over management decisions, ASMs are
integral to store management insofar as they provide the first layer of employee review and
act as a liaison between the store manager and the store’s shift supervisors and baristas.
Winans commenced suit on April 18, 2008, to compel Starbucks to include ASMs in
store tip pools, and to obtain tips to which they were purportedly entitled under N.Y. Lab.
Law § 196-d. On cross-motions for summary judgment, the district court concluded that
there was a genuine dispute of material fact whether ASMs were employees eligible to retain
gratuities under § 196-d. See Winans v. Starbucks Corp., 796 F. Supp. 2d at 518.
Nevertheless, the district court awarded summary judgment to Starbucks on the ground that,
while New York law excludes an employer or his agent from retaining tips, § 196-d does not
compel an employer to include any specific eligible employees in a tip pool. See id. at
518–19. Thus, the district court granted Starbucks’s summary judgment motion, denied
plaintiffs’ motion, and dismissed as moot their motion for class certification. See id. at 520.
Winans’s timely appeal followed.
8
II. Discussion
In each appeal, plaintiffs are citizens of New York suing Starbucks, a Washington
corporation, for more than $5 million in damages on behalf of a putative class of Starbucks
employees. Accordingly, we have diversity jurisdiction to decide the questions of state law
each appeal presents. See 28 U.S.C. § 1332(d)(2)(A).
We review the district court’s rulings on cross-motions for summary judgment de
novo, in each case construing the evidence in the light most favorable to the non-moving
party. See Novella v. Westchester County, 661 F.3d 128, 139 (2d Cir. 2011). We will affirm
an award of summary judgment only where there is no genuine issue of material fact and a
party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a); Novella v.
Westchester County, 661 F.3d at 139.
Barenboim submits that the district court committed legal error in determining that
shift supervisors are not Starbucks agents prohibited from retaining tips under N.Y. Lab. Law
§ 196-d because the evidence shows that shift supervisors, as their title states, exercise
supervisory functions. Winans maintains that the evidence indisputably showed that ASMs
are not Starbucks agents because they engage primarily in customer service and lack any
final managerial authority, and that they are therefore eligible to receive tips from Starbucks
tip pools. Winans further argues that, since ASMs may retain the tips they earn, § 196-d does
not permit Starbucks to distribute tips contributed to the tip pool for their services to baristas
and shift supervisors.
In this appeal, Barenboim has also moved for certification to the New York Court of
Appeals. See N.Y. Comp. Codes R. & Regs. Tit. 12, § 500.27(a) (authorizing New York
9
Court of Appeals to accept certified question from this court). Our decision whether to
certify a question is guided by three factors: (1) whether the New York Court of Appeals has
addressed the issue and, if not, whether the decisions of other New York courts permit us to
predict how the Court of Appeals would resolve it; (2) whether the question is of importance
to the state and may require value judgments and public policy choices; and (3) whether the
certified question is determinative of a claim before us. See Joseph v. Athanasopoulos, 648
F.3d 58, 67 (2d Cir. 2011). As we explain infra, these three factors are satisfied in both
appeals, and we therefore defer decision and certify questions to the New York Court of
Appeals.
A. Barenboim’s § 196-d Claim
New York Labor Law § 196-d states, in relevant part:
No employer or his agent or an officer or agent of any corporation, or any
other person shall demand or accept, directly or indirectly, any part of the
gratuities, received by an employee, or retain any part of a gratuity or of any
charge purported to be a gratuity for an employee. . . . Nothing in this
subdivision shall be construed as affecting the . . . sharing of tips by a waiter
with a busboy or similar employee.
Construing the statute, we have concluded that, “[b]y its plain terms, § 196-d bars employers
from requiring tipped employees to share tips with employees who do not perform direct
customer service—i.e., employees who are not ‘busboy[s] or similar employee[s]’ and
employees who are managers or ‘agent[s]’ of the employer.” Shahriar v. Smith & Wollensky
Rest. Grp., Inc., 659 F.3d 234, 240 (2d Cir. 2011).
Disregarding the fact that shift supervisors undoubtedly “perform direct customer
service” that customers acknowledge with gratuity contributions to the tip pool, id.,10
Barenboim contends that shift supervisors can receive no part of any tip pool because they
are employer “agents” under New York Labor Law § 196-d. In support, Barenboim cites
New York Labor Law § 2(8-a), which defines “agent” to include “a manager, superintendent,
foreman, supervisor or any other person employed acting in such capacity,” id. (emphasis
added). Barenboim argues that, because shift supervisors engage in at least some supervisory
functions, they are ineligible to receive any distribution from a tip pool. Insofar as § 196-d
permits an employer to require a waiter to share tips with a busboy, Barenboim urges us to
construe the statute to permit such tip sharing only between a tipped employee and another
employee a “step down the ladder.” Barenboim Br. 29. Thus, Barenboim reasons that
§ 196-d must be construed to prohibit Starbucks from ordering a barista to share pooled tips
with a shift supervisor, an employee standing “a step [up] the ladder.”
Like the district court, we are skeptical of Barenboim’s argument. As we observed
in Shahriar, what the plain language of § 196-d prohibits is “requiring tipped employees to
share tips with employees who do not perform direct customer service.” Shahriar v. Smith
& Wollensky Rest. Grp., Inc., 659 F.3d at 240 (emphasis added). It is undisputed that shift
supervisors perform direct customer service. Indeed, it is their primary job duty. Further,
shift supervisors generate tips for such service that are among those pooled for weekly
distribution. Thus, plaintiffs are not challenging an employer requirement that they share
pooled tips paid only to baristas with shift supervisors. Rather, they are claiming that, under
New York law, even tips earned by shift supervisors, once included in a pool with tips earned
by baristas, must be paid only to baristas. This is not clear from the text of New York law.
11
Indeed, under our analogous FLSA jurisprudence, the fact that an employee has some
supervisory responsibilities does not render him an “employer” ineligible to retain gratuities.
29 U.S.C. § 203(m).1 Rather, in the FLSA context, we would examine the economic reality
of the employment relationship to determine whether shift supervisors are statutory
employers, and we would almost certainly conclude that they are not because shift
supervisors do not hire and fire employees, determine employees’ rate of pay, or maintain
employment records, and because they exercise only limited supervision of baristas. See
Carter v. Dutchess Cmty. Coll., 735 F.2d 8, 12 (2d Cir. 1984) (providing non-exhaustive list
of factors in applying economic reality test); accord Velez v. Sanchez, 693 F.3d 308, 326 (2d
Cir. 2012).
Finally, in January 2011, while this appeal was pending, the New York Department
of Labor promulgated the New York State Hospitality Wage Order (“Hospitality Wage
Order”), which governs employer-mandated tip pools in the hospitality industry. In pertinent
part, the Hospitality Wage Order states that “[a]n employer may require food service workers
to participate in a tip pool and may set the percentage to be distributed to each occupation
from the tip pool.” N.Y. Comp. Codes R. & Regs. tit. 12, § 146-2.16(b) (2011). The Order
is emphatic: “Only food service workers may receive distributions from the tip pool.” Id.The Order defines “food services workers” as employees “primarily engaged in the serving
1
Under the FLSA, an employer may credit tips toward an employee’s earnings for
purposes of complying with federal minimum wage requirements, provided that “all tips
received by such employee have been retained by the employee.” 29 U.S.C. § 203(m); see
Shahriar v. Smith & Wollensky Rest. Grp., Inc., 659 F.3d at 240.
12
of food or beverages to guests, patrons or customers.” Id. § 146-3.4(a). It lists “wait staff,
bartenders, captains and bussing personnel,” as well as employees “regularly receiv[ing]
tips,” as examples of persons falling within the definition. Id. Moreover, the Order
separately instructs that eligibility to participate in a tip pool “shall be based upon duties and
not titles,” id. § 146-2.14(e), again referencing “captains who provide direct food service to
customers” among the eligible occupations, id. § 146-2.14(e)(8).
Starbucks contends that this Order disposes of Barenboim’s suit in Starbucks’s favor.
The Hospitality Wage Order clearly provides that the performance of some supervisory
functions does not render an employee ineligible to participate in a tip pool, so long as that
employee is “primarily engaged in the serving of food or beverages to . . . customers.” Id.
§ 146-3.4(a). Thus, the Hospitality Wage Order specifically includes “captains who provide
direct food service to customers” as among the employees eligible for tip pooling, id.
§§ 146-2.14(e)(8), 146-3.4(a), even though captains are also responsible for supervising
others, see generally Webster’s Third New International Dictionary 334 (1986) (defining
“captain” to include “restaurant functionary in charge of waiters: headwaiter”). Here, shift
supervisors, who principally serve Starbucks customers, but who also provide limited
supervision to baristas, seem analogous to the captains the Department of Labor identified
as eligible to receive tip-pool distributions. In addition, the Hospitality Wage Order
undermines Barenboim’s reliance on the last sentence of § 196-d regarding employer-
mandated tip sharing between a waiter and another similar employee. The Order clarifies
that the statute permits both tip sharing, the practice by which a tipped employee (a waiter)
13
gives a portion of his own tips to another employee (a busboy) who also provides services
to customers but without himself receiving any gratuity, see N.Y. Comp. Codes R. & Regs.
tit. 12, § 146-2.14(a) (defining tip sharing), as well as tip pooling, the practice by which
employees, each of whom receives tips, intermingle those gratuities in a common pool for
future distribution, see id. § 146-2.14(b) (defining tip pooling). The Hospitality Wage Order
clarifies that in a tip-pooling arrangement, any employee primarily engaged in customer
service may receive a distribution from the tip pool, even if that employee is the equivalent
of a captain, who stands a step up the staff hierarchy.
While we may doubt the merits of Barenboim’s claim for the reasons just mentioned,
we are hesitant to rule it out completely. First, although this court has described the purpose
of N.Y. Lab. Law § 196-d as prohibiting employers from retaining tips earned by employees
directly serving customers, see Shahriar v. Smith & Wollensky Rest. Grp., Inc., 659 F.3d
at 240, that statement was informed by district court decisions construing the statute, see id.at 240–41 (citing Chan v. Triple 8 Palace, Inc., No. 03-cv-6048, 2006 WL 851749, at *16
(S.D.N.Y. Mar. 31, 2006) (Lynch, J.), and Ayres v. 127 Rest. Corp., 12 F. Supp. 2d 305, 307
n.1 (S.D.N.Y. 1998) (Chin, J.)), and a single New York administrative adjudication, see id.at 241 (citing Tandoor Rest., Inc. v. Comm’r of Labor, No. PR-82-83 (Industrial Bd. of App.
Dec. 23, 1987)). Our description of § 196-d’s purpose was not based on a New York court’s
construction of the law, much less a decision of the New York Court of Appeals.
Moreover, our description of the statute was made in the context of deciding that
§ 196-d and the FLSA share a common aim and should be construed in the same manner.
14
See id. at 241 (“Thus, 29 U.S.C. § 203(m) and § 196-d bar the same types of tipping
practices, and actions that violate the tip pooling provision of 29 U.S.C. § 203(m) may also
violate § 196-d.”). But plaintiffs offer a textual argument that neither this court in Shahriar
nor any New York court appears to have considered. Unlike the FLSA, which only permits
tips to be credited to an employee’s wage if “all tips received by such employee have been
retained by the employee,” 29 U.S.C. § 203(m), and thus “prohibits ‘employers’ from sharing
in waitstaff’s tips,” Barenboim Br. 18, New York Labor Law proscribes either an “employer
or his agent” from retaining employees’ tips, N.Y. Lab. Law § 196-d (emphasis added).
Thus, where the FLSA only generally limits “any person acting directly or indirectly in the
interest of an employer in relation to an employee” from retaining tips, 29 U.S.C. § 203(d)
(defining “employer”), New York Labor Law specifically limits any “manager,
superintendent, foreman, supervisor or any other person employed in such capacity” from
retaining tips, N.Y. Lab. Law § 2(8-a) (defining “agent”) (emphasis added). Barenboim
argues that New York Labor Law therefore reflects a more limiting legislative intent than
Congress’s use of the single word “employer” in the FLSA. Specifically, he maintains that
any employee acting as a “supervisor,” even in a limited capacity, is ineligible to receive tips
in New York, even though her employer could credit those tips as wages under federal law.
We cannot ignore this textual difference between the FLSA and New York Labor
Law. Indeed, as Barenboim notes, the New York Court of Appeals has previously
interpreted § 196-d more broadly than its parallel FLSA provision. In Samiento v. World
Yacht Inc., 10 N.Y.3d 70, 854 N.Y.S.2d 83 (2008), the Court of Appeals held that when a
15
banquet hall or other catering service imposes a mandatory service charge as purported
waitstaff compensation, that service charge is considered a “gratuity” under § 196-d even
though the payment is mandatory, not voluntary. See id. at 78–79. Tips under the FLSA,
by contrast, do not include such obligatory service charges. See 29 C.F.R. § 531.55(a) (“A
compulsory charge for service . . . imposed on a customer by an employer’s establishment,
is not a tip . . . .”); accord Chan v. Triple 8 Palace, Inc., 2006 WL 851749, at *3 & n.9. Thus,
under New York law, an employer may not retain any part of a compulsory charge that it
purports to collect to compensate its employees, while under federal law, the same employer
may retain portions of that charge and still claim a tip credit. Because, as this example
illustrates, § 196-d and the FLSA do not overlap fully in their text and interpretation, we
cannot readily dismiss Barenboim’s argument by reference to the FLSA.
Insofar as there is any ambiguity in New York law regarding when an employee is a
“supervisor” and, thus, an employee’s “agent” who may not retain tips, we would be bound
to apply the Hospitality Wage Order, provided that the Department of Labor’s regulations
were a permissible interpretation of § 196-d. See N.Y. Lab. Law § 199 (authorizing
Department of Labor Commissioner to issue rules and regulations for enforcing state laws
governing employers’ payment of wages to employees); Samiento v. World Yacht Inc., 10
N.Y.3d at 79, 854 N.Y.S.2d at 88 (instructing that “Labor Department’s interpretation of a
statute it is charged with enforcing is entitled to deference” pursuant to general administrative
law principle that “construction given statutes and regulations by the agency responsible for
their administration, if not irrational or unreasonable, should be upheld”). See generally Golf
16
v. N.Y. State Dep’t of Soc. Servs., 91 N.Y.2d 656, 667, 674 N.Y.S.2d 600, 605 (1998)
(holding that, where statute is ambiguous, deference is appropriately accorded to agency’s
interpretation). But no court—state or federal—appears yet to have construed or applied the
Hospitality Wage Order regulations, but see Shahriar v. Smith & Wollensky Rest. Grp., Inc.,
659 F.3d at 241 n.3 (noting promulgation of Hospitality Wage Order, but concluding that it
did not affect outcome of appeal), and we are reluctant to hold in advance of any New York
court that the Order represents a permissible interpretation of the state statute.
Barenboim argues that the Hospitality Wage Order regulations constitute an
unreasonable interpretation of § 196-d. He submits that, by allowing waitstaff captains to
participate in tip pools, the Hospitality Wage Order contradicts the plain language and
legislative intent of § 196-d, which bars any employer’s agent, including a “supervisor,” from
retaining part of a gratuity. In plaintiffs’ view, there is no ambiguity in the meaning of
“supervisor”: when the New York legislature defined “agent” to include supervisors, it
intended to reference all supervisors, even if supervision constituted a fraction of an
employee’s job responsibilities. Barenboim urges this construction of the words “supervisor”
and “agent” based on the New York Court of Appeals’ instruction that, given “the remedial
nature of Labor Law § 196-d, such language should be liberally construed in favor of the
employees.” Samiento v. World Yacht Inc., 10 N.Y.3d at 78, 854 N.Y.S.2d at 87. He asserts
that the employees to be favored in this case are baristas, the only workers without any
supervisory responsibilities, so that they may receive a greater portion of gratuities. Insofar
as the Hospitality Wage Order expands the class of employees eligible to retain tips under
17
§ 196-d to include “captains” who exercise supervisory functions, see N.Y. Comp. Codes R.
& Regs. tit. 12, §§ 146-2.14(e)(8), 146-3.4(a), Barenboim submits that it is ultra vires.
Barenboim also argues that the regulations are ultra vires because they conflict with
§ 196-d’s final sentence, which only sanctions tip sharing between a waiter and a “busboy
or similar employee.” He maintains that a captain is not a “similar employee” because he is
superior, not inferior, to a waiter, and the legislature did not contemplate that the waiter’s tips
would be shared up the staff hierarchy. Thus, he urges that the Hospitality Wage Order
would be unlawful if relied on to allow shift supervisors to receive a share of the tips earned
by baristas.
We have certain reservations as to Barenboim’s urged construction of § 196-d, and
thus seek further guidance from the New York Court of Appeals regarding the meaning of
the words “agent” and “supervisor” under New York Labor Law. Further, we are unsure
how Samiento’s admonition to “liberally” construe § 196-d “in favor of the employees”
applies where, as here, the entire dispute centers on who the employees—as opposed to the
employer and his agents—are and, thus, who should benefit under the statute. Clearer
direction is needed as to what factors New York views as determinative of who is an
employer’s agent and, conversely, who is his employee.
Besides this interpretative problem, a further state law question is presented: Does the
Hospitality Wage Order apply retroactively where, as here, the class claims arise before, as
well as after, that order’s promulgation? New York regulations presumptively lack
retroactive effect. See Good Samaritan Hosp. v. Axelrod, 150 A.D.2d 775, 777, 542
18
N.Y.S.2d 28, 31 (2d Dep’t 1989) (citing Bowen v. Georgetown Univ. Hosp., 488 U.S. 204,
208 (1988)). Nevertheless, in this case, application of the Hospitality Wage Order to
Starbucks’s conduct may not raise a retroactivity concern because the regulations do not
attach new penalties or other legal consequences to actions preceding their promulgation;
they merely clarify the meaning of an ambiguous statute. See American Tel. & Tel. Co. v.
State Tax Comm’n, 61 N.Y.2d 393, 404, 474 N.Y.S.2d 434, 439–40 (1984). See generally
Landgraf v. USI Film Prods., 511 U.S. 244, 269–70 (1994). Here, too, it is better for the
New York Court of Appeals to decide in the first instance whether, assuming that application
of the Department of Labor’s regulations is dispositive, the Hospitality Wage Order governs
Barenboim’s entire case or only the portion of it postdating the Order’s promulgation.
B. Winans’s § 196-d Claim
Like Barenboim, Winans presents novel questions of New York law, not only with
respect to (1) what factors determine whether an employee is an “agent” under § 196-d, but
also (2) whether, if an employee is otherwise eligible to receive tips under § 196-d, an
employer can preclude that employee from receiving any distributions from a common tip
pool. We address each question separately.
1. Starbucks “Agents”
The application of § 196-d to Starbucks ASMs is potentially more vexing than its
application to shift supervisors. On the one hand, if Barenboim’s interpretation prevails and
an employee with any supervisory functions is deemed an employer’s agent, then, a fortiori,
ASMs are ineligible to receive tip-pool distributions because they exercise greater managerial
19
and supervisory authority than do shift supervisors. But if Barenboim’s interpretation of
§ 196-d is incorrect, and shift supervisors are not agents excluded by law from sharing in a
tip pool, then it is not clear that the same conclusion applies with respect to the agency status
of ASMs.
The record shows that ASMs assist store managers in making hiring and firing
decisions, assigning shifts to baristas and shift supervisors, evaluating employee
performance, recommending corrective action for employee infractions, and processing
payroll. While this means ASMs have greater managerial and supervisory authority than
shift supervisors, we nevertheless cannot confidently conclude that they have the degree of
authority necessary to be Starbucks agents so as to be precluded by § 196-d from any
participation in tip pools, even though some of the gratuities therein were given for service
performed by ASMs.2
Winans contends that ultimate managerial power rests exclusively with store
managers, and that ASMs do little more than assist them in exercising that power. Starbucks
maintains, however, that ASMs are part of a store’s management team and that, despite their
lack of final decisionmaking authority, their undisputed involvement in those management
decisions is sufficient for them to be recognized as “agents” under New York Labor Law.
The parties’ dispute is more legal than factual, with resolution depending on whether New
York views final decisionmaking authority as necessary to demonstrate that someone is an
2
We note that whether ASMs, or for that matter shift supervisors, may receive
distributions from tip pools in light of § 196-d is a different question from whether
Starbucks’s distribution method—by reference to hours worked—is subject to attack.
20
employer’s agent. New York Labor Law § 2(8-a) defines an “agent” as “a manager” without
further explanation, and there are no New York court decisions discussing the meaning of
the word “agent” in the context of § 196-d. But see In re Starbucks Emp. Gratuity Litig., 264
F.R.D. at 72 (citing prior district court cases requiring employee to have “full authority” to
manage and supervise employees to be “employer or his agent” under § 196-d (internal
quotation marks omitted)).
The parties further dispute the relevance of ASMs’ customer service to Winans’s
§ 196-d claim. Winans argues that, because ASMs spend the vast majority of their time
engaged in customer service rather than managerial tasks, they should be treated the same
as baristas and shift supervisors under § 196-d. Although Starbucks does not deny that
ASMs spend most of their time serving customers, it notes that store managers, who no one
doubts are the company’s agents, also provide customer service. Starbucks further asserts
that ASMs are distinguishable from baristas and shift supervisors because ASMs have greater
managerial responsibilities and are salaried, full-time employees. The relevancy of ASMs’
customer service responsibilities to resolution of their agency status is not clearly evident
from the statute and limited caselaw. The Department of Labor’s Hospitality Wage Order
does say that a “food service worker” may be included in a tip pool, N.Y. Comp. Codes R.
& Regs. tit. 12, § 146-2.16(b), so long as he is “primarily engaged in the serving of food or
beverages” to customers, id. § 146-3.4. Even assuming that the Order governs disposition
of this case, much depends on the meaning of “primarily engaged.” The phrase could
measure the amount of time that an employee is engaged in customer service relative to other
duties, which could favor Winans, or it could refer to the most salient responsibility from the
employer’s point of view, which could favor Starbucks in light of its treatment of ASMs as
21
managerial staff. Or it could refer to some combination of these or other measurements.
In any event, Starbucks maintains that ASMs cannot receive distributions from tip
pools because they are not similar to waiters or busboys as a consequence of their managerial
roles. Starbucks does not go as far as Barenboim in arguing that the Department of Labor’s
Hospitality Wage Order is ultra vires to the extent it permits captains, who exercise some
supervisory functions relative to other waitstaff, to receive tip-pool distributions. But if
Starbucks is correct that ASMs are not akin to waiters, busboys, or other “similar
employees”—who, if the Hospital Wage Order controls, would include captains—and,
therefore, may not receive tip-pool distributions, we would need to identify a foundational
principle on which to rest this conclusion. None is apparent from existing New York law.
Thus, the same interpretative difficulty is present in Barenboim’s and Winans’s
appeals: What factors should a court consider in determining whether an employee is his
employer’s agent and, thus, ineligible to receive distributions from an employer-mandated
tip pool? Because the meaning of the word “agent” in § 196-d is not settled in New York
caselaw, we defer decision and certify this question to the New York Court of Appeals.
2. Exclusion from Starbucks Tip Pools
Assuming without deciding that ASMs are not Starbucks agents under § 196-d, a
second question arises in Winans’s appeal: Does New York Labor Law compel Starbucks
to include ASMs in its stores’ tip pools? Section 196-d is silent as to whether an employer
can exclude otherwise eligible tip-earning employees from a common tip pool. As the
district court observed, “the plain language of Section 196-d does not grant any employee
a right to participate in tip pools or to receive the proceeds therefrom. Rather, the statute
defines who is eligible to participate in tip pools—waiters, busboys, and other similar
22
employees—and who is not—employers, their agents, and any other person.” Winans v.
Starbucks Corp., 796 F. Supp. 2d at 519. Indeed, the purpose of § 196-d was to ensure not
that certain employees are eligible to receive tip-pool distributions, but that certain
individuals, i.e., the employer or his agent, are ineligible to receive the compensation that
customers believed they were paying to other employees. “The drafters of Labor Law
§ 196-d sought to end the unfair and deceptive practice of an employer retaining money paid
by a patron under the impression that he is giving it to the employee, not to the employer.”
Samiento v. World Yacht Inc., 10 N.Y.3d at 78 n.4, 854 N.Y.S.2d at 87 n.4 (internal
quotation marks omitted).
In light of the statute’s purpose to define who is ineligible to retain tips and its silence
with respect to whether a tip-eligible employee must retain some portion of his gratuities, the
district court ruled that § 196-d does not require an employer to include any particular
employee or group of employees in its tip pool. See Winans v. Starbucks Corp., 796 F. Supp.
2d at 519. Rather, who participates in a tip pool is a decision left to the employer’s
discretion. Winans challenges this conclusion, arguing essentially as follows: (a) ASMs
receive tips when they serve customers, which tips are placed in a common jar;3 (b) § 196-d
3
There is a dispute of fact as to whether customers served by an ASM who place a
gratuity in the common tip jar actually expect that gratuity to be paid to the ASM. Compare
Starbucks Br. (Winans) 23 (stating that there is no evidence of customer deception), with
Winans Br. 31–35 (identifying evidence that ASMs engage primarily in customer service
and, therefore, urging inference that customers would expect ASMs to receive portion of
their tips), and Winans Reply Br. 14–15 (emphasizing that ASMs spend “up to 98% of their
days” involved in customer service). In reviewing Starbucks’s motion for summary
judgment, we must assume that this factual dispute would be resolved in favor of Winans,
see Novella v. Westchester County, 661 F.3d at 139, and therefore that customers served by
an ASM expect that ASM to receive some portion of their tips.
It is also undisputed that no Starbucks policy forbids ASMs from accepting tips given
directly to them rather than placed in the common tip jar. But there is no evidence in the
record of such direct tipping.
23
forbids employers from retaining tips paid to an employee, but an employer retains tips when
he collects them from one group of employees and distributes them to a different group of
employees, insofar as this subsidizes the wages that the employer otherwise would have to
pay from its gross revenues; and, therefore, (c) Starbucks should be prohibited from
excluding ASMs from the tip pool while at the same time retaining tips earned by ASMs and
paying them to other employees—here, baristas and shift supervisors.
Winans’s construction of § 196-d cannot be dismissed as implausible. Indeed, the
statute says nothing indicating that this sort of total tip redistribution from one employee to
another is permissible. Insofar as the second sentence of § 196-d expressly permits some tip
redistribution—specifically, tip sharing by “a waiter with a busboy or similar employee,”
N.Y. Lab. Law § 196-d—the statute simply approves the standard practice of waiters sharing
tips with waitstaff who assist them but do not receive tips on their own. Winans contends
that Starbucks’s challenged policy involves the wholesale taking of ASMs’ tips in order to
redistribute them to lower-level employees, which § 196-d does not expressly sanction.
Winans also asserts that Starbucks’s policy toward ASMs finds no support in the
Department of Labor’s Hospitality Wage Order. The Order states that employers may
mandate a tip-pooling system and allocate tips to their employees according to fixed
percentages, see N.Y. Comp. Codes R. & Regs. tit. 12, § 146-2.16(b), but it does not
expressly permit an employer to exclude an employee from receiving any distributions from
a tip pool that includes tips earned by that employee.
On the other hand, Starbucks is correct that the Hospitality Wage Order affords an
employer discretion to create tip pools and to decide the formula for tip distributions from
those pools. It does not mandate the inclusion of any particular employees in such pools.
24
Starbucks additionally notes employers’ discretion to prohibit certain employees from
receiving tips. See N.Y. Comp. Codes R. & Regs. tit. 12, § 142-2.21 (defining “tips” and
“gratuities,” and stating that “[n]o gratuities or tips shall be deemed received for the purpose
of this Part if their acceptance is prohibited by the employer or prohibited by law”).
Plaintiffs counter that § 142-2.21 permits an employer to ban all tipping, not all tips for
specific employees, much less a share in a tip pool that includes gratuities for services
performed by the excluded employee. Further, plaintiffs note that N.Y. Comp. Codes R. &
Regs. tit. 12, § 146-2.18 states that “[a] charge purported to be a gratuity must be distributed
in full as gratuities to the service employees or food service workers who provided the
service.” Plaintiffs contend that this regulation commands that, when a customer gives a tip
as consideration for service, the employee who provided that service must receive that
payment or, at a minimum, a share of that payment from the tip pool. No New York court
has yet construed these regulations or explained how they interact, nor can we confidently
predict how the New York Court of Appeals would apply them in the context of this case.
Further, in the Winans case, as in Barenboim, the parties agree that the court must
interpret § 196-d liberally in favor of employees, see Samiento v. World Yacht Inc., 10
N.Y.3d at 78, 854 N.Y.S.2d at 87, but they contest what this liberal construction would
entail. Winans urges that it would require Starbucks to include ASMs in the tip pool, so that
all employees can benefit from customers’ gratuities. Starbucks responds that including full-
time, salaried ASMs in the tip pool would harm baristas and shift supervisors by reducing
their share of tip-pool distributions. Winans counters that baristas and shift supervisors are
not harmed by being required to share a tip pool with all employees whose gratuities are
included therein. Indeed, a contrary holding results in their receipt of a windfall. Winans
25
submits that the arrangement allows Starbucks to avoid paying the baristas and shift
supervisors at the expense of ASMs. Which one of these interpretations is most consistent
with Samiento’s command liberally to construe § 196-d in the employees’ favor is not
obvious and involves state policy judgments best decided in the first instance by the New
York Court of Appeals. See Joseph v. Athanasopoulos, 648 F.3d at 67.
C. Certification
As explained supra, existing state caselaw on the questions identified is sparse and
insufficient to permit us to predict with confidence how the New York Court of Appeals
would construe New York Labor Law and the Department of Labor’s regulations as they
apply in this case. See 10 Ellicott Square Court Corp. v. Mountain Valley Indem. Co., 634
F.3d 112, 125–26 (2d Cir. 2011) (holding that certification is appropriate “if the New York
Court of Appeals has not squarely addressed an issue and other decisions by New York
courts are insufficient to predict how the Court of Appeals would resolve it” (internal
quotation marks omitted)). Thus, the first certification factor is satisfied.
The same conclusion obtains as to the second factor, as the identified questions
present important issues of New York law and policy. Their resolution will shape the basic
rules of how the hospitality industry, which is plainly vital to New York’s economy, must
pay its employees. As a matter of comity, we deem it appropriate to certify these questions
to the New York Court of Appeals. See Sealed v. Sealed, 332 F.3d 51, 59 (2d Cir. 2003)
(“Where a question of statutory interpretation implicates the weighing of policy concerns,
principles of comity and federalism strongly support certification.”).
Finally, certification of these questions may dispose of the case entirely. See Joseph
v. Athanasopoulos, 648 F.3d at 67. Specifically, the New York Court of Appeals’
26
construction of the phrase “employer or his agent” in § 196-d, and “supervisor” in § 2(8-a),
as well as its decision as to the application of the Hospitality Wage Order to some or all of
the claims raised, will likely determine which of the parties is entitled to summary judgment
in Barenboim. Those rulings, as well as the New York Court of Appeals’ decision as to
whether state law prohibits Starbucks from excluding ASMs from its tip pools, even if they
are eligible to receive tips under § 196-d, will likely determine which of the parties is entitled
to summary judgment in Winans. Even if the Court of Appeals’ responses to the certified
questions do not resolve all questions of fact, they will ensure that any federal trial of such
questions is conducted with a correct understanding of the controlling principles of New
York law.
III. Conclusion
To summarize, we defer decision in these cases, grant Barenboim’s certification
motion, and certify the following questions for these cases in tandem to the New York Court
of Appeals:
1. What factors determine whether an employee is an “agent” of his employer for
purposes of N.Y. Lab. Law § 196-d and, thus, ineligible to receive distributions from an
employer-mandated tip pool? In resolving this question for purposes of this case, the Court
of Appeals may also consider the following subsidiary questions:
a. Is the degree of supervisory or managerial authority exercised by an
employee relevant to determining whether the employee is a “manager [or] supervisor” under
N.Y. Lab. Law § 2(8-a) and, thus, an employer’s “agent” under § 196-d?
b. If an employee with supervisory or managerial authority renders services
that generate gratuities contributed to a common tip pool, does § 196-d preclude that
27
employee from sharing in the tip pool?
c. To the extent that the meaning of “employer or his agent” in § 196-d is
ambiguous, does the Department of Labor’s New York State Hospitality Wage Order
constitute a reasonable interpretation of the statute that should govern disposition of these
cases?
d. If so, does the Hospitality Wage Order apply retroactively?
2. Does New York Labor law permit an employer to exclude an otherwise eligible
tip-earning employee under § 196-d from receiving distributions from an employer-mandated
tip pool?
In certifying these questions, we do not bind the Court of Appeals to the particular
questions stated. Rather, the Court of Appeals may expand these certified inquiries to
address any further pertinent question of New York law as it might pertain to the particular
circumstances presented in these appeals. This panel retains jurisdiction and will consider
any issues that may remain on appeal once the New York Court of Appeals has either
provided us with its guidance or declined certification.
It is therefore ORDERED that the Clerk of this court transmit to the Clerk of the Court
of Appeals of the State of New York a Certificate, as set forth below, together with a
complete set of briefs and appendices, and the record filed in this court by the parties.
DECISION RESERVED.
IV. Certificate
The foregoing is hereby certified to the Court of Appeals of the State of New York
pursuant to 2d Cir. L.R. 27.2 and N.Y. Comp. Codes R. & Regs. Tit. 12, § 500.27(a) , as
ordered by the United States Court of Appeals for the Second Circuit.
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