The Coffee Showdown: Baristas’ Lawsuit Demonstrates Sensitivity Around Taxing Employees’ Tips
Starbucks, one of the nation’s top coffee retailers, is currently being sued by several baristas for allegedly improperly withholding pooled tips. Baristas, who are responsible for preparing customers’ drinks, regularly receive tips that they “pool” or split among those working on a shift. Starbucks elected to tax the tips.
The related lawsuit, initiated by the baristas, was filed in 2012 and is still going strong today. Most recently, the Oregon Supreme Court refused Starbucks’ request to dismiss the case. While Oregon and federal law allow employers to tax certain tips, they are clearly delineated and do not always apply to pooled tips.
This multi-year litigation (seeking eight figures in damages and injunctive relief) demonstrates how employers of all sizes need to take caution when subjecting employees’ wages and tips to withholding. Failure to do so can result in extensive litigation and a potentially costly payout.
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