The Court of Appeals found that shift supervisors do much of the same work as the coffee servers and therefore get to share in the tips. The court also ruled the company can deny those tips to assistant managers.
The ruling, responding to two lawsuits, backed Starbucks' policy of divvying up the tips, saying it's consistent with labor law.
Hospitality industry groups say the state court decision will be felt far beyond shops owned by Starbucks. and will affect 42,000 New York businesses statewide and a quarter-million hospitality industry workers in New York City alone.
Starbucks baristas are part-time workers who serve customers and share tips weekly based on hours worked. They can be promoted after six months to shift supervisors.
Shift supervisors are also part-time wage workers who mostly serve customers, but also assign baristas, provide input on their performance and direct the flow of customers.
Assistant managers are full-time, get some benefits such as paid holidays and vacations, and are eligible for bonuses.
Attorney Adam Klein argued assistant managers spend most of their time serving customers and should get a share of the tip jar. Klein said his clients don't have the power to hire and fire, which he argued means they aren't "company agents" under labor law.
"Employees who regularly provide direct service to patrons remain tip-pool eligible even if they exercise a limited degree of supervisory responsibility," stated Judge Victoria Graffeo in writing the majority decision. "But an employee granted meaningful authority or control over subordinates can no longer be considered similar to waiters and busboys ... and, consequently, is not eligible to participate in a tip pool."
Seattle-based Starbucks Corp. has nearly 18,000 retail stores in 60 countries. In April, it reported $3.6 billion in quarterly revenues.
Starbucks had 413 company-owned stores in New York at the end of its last fiscal year. Company spokesman Zack Hutson said the tip policy is applied consistently across the U.S., though not globally because laws differ in other countries.