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I .

Def endant St arbucks Corporat i on i s a Washi ngt on- based

cof f eehouse company t hat oper at es hundr eds of out l et s i n New Yor kSt at e. I n each st or e, St ar bucks empl oys f our cat egor i es of

empl oyees: bar i st as, shi f t super vi sor s, assi st ant st or e manager s

and st or e manager s. Bar i st as ar e t he f r ont - l i ne, ent r y- l evel

empl oyees r esponsi bl e f or t asks such as t aki ng or der s, maki ng and

servi ng t he company' s cof f ee, t ea and f ood of f er i ngs, oper at i ng

t he cash r egi st er , cl eani ng t abl es and st ocki ng pr oduct . They

wor k on a par t - t i me, hour l y basi s.

Af t er si x mont hs' empl oyment , bar i st as may become

el i gi bl e f or pr omot i on t o shi f t super vi sor s. Li ke bar i st as,

shi f t super vi sor s ar e pr i mar i l y r esponsi bl e f or ser vi ng f ood and

bever ages t o cust omer s. I n f act , t hey spend near l y al l t hei r

t i me per f ormi ng t he same cust omer - r el at ed dut i es under t aken by

bar i st as. They al so wor k on a par t - t i me basi s and ar e pai d anhour l y wage. As t hei r t i t l e suggest s, however , shi f t super vi sor s

have some super vi sor y r esponsi bi l i t i es, such as assi gni ng

bar i s tas t o par t i cul ar pos i t i ons dur i ng t hei r shi f t s , di r ect i ng

t he f l ow of cust omer s and pr ovi di ng bar i st as wi t h f eedback about

t hei r per f or mance. Shi f t super vi sor s may al so open and cl ose

st or es, change t he cash r egi st er t i l l s and, i f nei t her an

assi st ant st or e manager nor st or e manager i s pr esent , make bank

deposi t s.

Assi st ant st or e manager s r epr esent t he t hi r d r ung i n

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t he St ar bucks hi er ar chy. Al t hough ass i st ant st or e manager s

devot e t he maj or i t y of t hei r t i me per f or mi ng cust omer - or i ent ed

servi ces, t hey al so possess gr eat er manager i al and super vi soryaut hor i t y t han shi f t super vi sor s. For exampl e, t hey assi st st or e

manager s i n i nt er vi ewi ng appl i cant s, assi gni ng wor k shi f t s t o

bar i st as and shi f t super vi sor s, and eval uat i ng empl oyee

per f or mance. They al so par t i ci pat e i n deci si ons t o hi r e or f i r e

empl oyees, r ecommend cor r ect i ve act i on f or empl oyee i nf r act i ons

and pr ocess payr ol l . I n essence, an ass i st ant s t or e manager

f unct i ons as t he st or e manager ' s deput y. I n cont r ast t o bar i st as

and shi f t super vi sor s, assi st ant st or e manager s ar e f ul l - t i me

empl oyees who r ecei ve a sal ar y i f t hey work at l east 37 hour s per

week. And unl i ke bar i st as and shi f t super vi sor s, t hey ar e

el i gi bl e f or quar t er l y bonuses and cer t ai n benef i t s , i ncl udi ng

hol i day and si ck pay.

Fi nal l y, st or e manager s const i t ut e t he hi ghest r ank i nt he wor kf or ce st r uct ur e. Wi t h t he suppor t of assi st ant st or e

manager s, st or e manager s ar e r esponsi bl e f or t he over al l

oper at i on of t he st or e. They have t he power t o hi r e, pr omot e,

t r ansf er , schedul e, di sci pl i ne and t er mi nat e bar i st as and shi f t

super vi sor s. St or e manager s, l i ke assi st ant st or e manager s, ar e

f ul l - t i me, sal ar i ed empl oyees who ar e el i gi bl e f or var i ous

benef i t s .

St ar bucks mai nt ai ns a wr i t t en pol i cy gover ni ng t he

col l ect i on, st or age and di st r i but i on of cust omer t i ps. Pur suant

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t o t hi s pol i cy, each St ar bucks st or e pl aces a pl exi gl ass

cont ai ner at t he count er wher e pat r ons may deposi t t i ps. Once

t hese t i p cani st er s become f ul l , St ar bucks r equi r es t hat t hey beempt i ed i nt o a bag and t he money i s st or ed i n a saf e. At t he end

of each week, t he t i ps ar e t al l i ed and di st r i but ed i n cash t o t wo

cat egor i es of empl oyees - - bar i st as and shi f t super vi sor s - - i n

propor t i on t o t he number of hour s each empl oyee wor ked.

St ar bucks does not per mi t i t s assi st ant st or e manager s or st or e

manager s t o shar e i n t he weekl y di st r i but i on of t i ps. The

company' s deci si on t o i ncl ude shi f t super vi sor s i n t hese t i p

pool s was t he i mpet us f or t he f i r st l awsui t bef or e us, whi l e i t s

excl usi on of assi st ant st or e manager s under l i es t he cl ai ms i n t he

second act i on.

I n 2008, pl ai nt i f f s J eana Bar enboi m and J ose Or t i z

( col l ect i vel y, Bar enboi m) , t wo f or mer St ar bucks bar i st as, br ought

a put at i ve cl ass act i on i n t he Uni t ed St at es Di st r i ct Cour t f ort he Sout her n Di st r i ct of New Yor k al l egi ng t hat St ar bucks' pol i cy

of i ncl udi ng shi f t super vi sor s i n t he t i p pool s was unl awf ul

under Labor Law 196- d. I n par t i cul ar , Bar enboi m cl ai med t hat

shi f t super vi sor s shoul d not be abl e t o r ecei ve di st r i but i ons

f r om a st or e' s t i p pool because t hey ar e St ar bucks " agent s" who

may not " demand or accept , di r ect l y or i ndi r ect l y, any par t of

t he gr at ui t i es, r ecei ved by an empl oyee" ( Labor Law 196- d) . I n

ot her wor ds, Bar enboi m cont ended t hat t he t i p j ar pr oceeds bel ong

excl usi vel y t o St ar bucks bar i st as. On cr oss mot i ons f or summar y

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j udgment , t he Di st r i ct Cour t gr ant ed St ar bucks ' mot i on,

concl udi ng t hat Labor Law 196- d does not bar shi f t super vi sor s

f r om par t i ci pat i ng i n t i p pool s because t hei r l i mi t ed super vi sor yr esponsi bi l i t i es " do not car r y t he br oad manager i al aut hor i t y or

power t o cont r ol empl oyees t hat cour t s have hel d t o be suf f i ci ent

t o r ender an empl oyee an ' empl oyer or [ empl oyer ' s] agent ' wi t hi n

t he meani ng of sect i on 196- d" ( I n r e St ar bucks Empl . Gr at ui t y

Li t i g. , 264 FRD 67, 72 [ SD NY 2009] ) . Bar enboi m appeal ed.

Meanwhi l e, pl ai nt i f f Eugene Wi nans and f our ot her

f or mer St ar bucks assi st ant st or e manager s ( col l ect i vel y, Wi nans)

f i l ed a separ at e compl ai nt i n t he same cour t asser t i ng t hat

assi st ant st or e manager s ar e not i nel i gi bl e " agent s" and,

t her ef or e, t hey shoul d be ent i t l ed t o par t i ci pat e i n t he t i p

pool s under Labor Law 196- d. Put di f f er ent l y, t hey cl ai med

t hat t he t i ps shoul d be di st r i but ed among bar i st as, shi f t

super vi sor s and ass i st ant st or e manager s. On cr oss mot i ons f orsummary j udgment , t he Di st r i ct Cour t concl uded t hat t her e was a

t r i abl e i ssue of f act as t o whet her assi st ant st or e manager s ar e

t i p- pool el i gi bl e but awarded St arbucks summary j udgment on t he

gr ound t hat , al t hough Labor Law 196- d excl udes an empl oyer or

i t s agent f r om r et ai ni ng t i ps, i t does not compel an empl oyer t o

i ncl ude any par t i cul ar el i gi bl e empl oyee i n a t i p pool ( Wi nans v

St ar bucks Cor p. , 796 F Supp 2d 515 [ SD NY 2011] ) . Wi nans

appeal ed.

Recogni zi ng t hat t he t wo appeal s pr esent ed unr esol ved

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quest i ons of New Yor k l aw, t he Second Ci r cui t cer t i f i ed t he

f ol l owi ng quest i ons t o us:

" 1. What f act or s det ermi ne whet her anempl oyee i s an ' agent ' of hi s empl oyer f orpur poses of N. Y. Labor Law 196- d and, t hus,i nel i gi bl e t o r ecei ve di s t r i but i ons f r om anempl oyer - mandat ed t i p pool ? I n r esol vi ngt hi s quest i on f or pur poses of t hi s case, t heCour t of Appeal s may al so consi der t hef ol l owi ng subsi di ar y quest i ons:

" a. I s t he degr ee of super vi sor y ormanager i al aut hor i t y exer ci sed by an empl oyeer el evant t o det er mi ni ng whet her t he empl oyeei s a ' manager [ or ] super vi sor ' under N. Y.Labor Law 2 ( 8- a) and, t hus, an empl oyer ' s' agent ' under 196- d?

" b. I f an empl oyee wi t h super vi sor y ormanager i al aut hor i t y r ender s ser vi ces t hatgener at e gr at ui t i es cont r i but ed t o a commont i p pool , does 196- d pr ecl ude t hat empl oyeef r om shar i ng i n t he t i p pool ?

" c. To t he ext ent t hat t he meani ng of ' empl oyer or hi s agent ' i n 196- d i sambi guous, does t he Depar t ment of Labor ' s New

Yor k St at e Hospi t al i t y Wage Or der const i t ut ea r easonabl e i nt er pr et at i on of t he st at ut et hat shoul d gover n di sposi t i on of t hesecases?

" d. I f so, does t he Hospi t al i t y Wage Or derappl y retr oact i vel y?

" 2. Does New Yor k Labor l aw per mi t anempl oyer t o excl ude an ot her wi se el i gi bl et i p- ear ni ng empl oyee under 196- d f r omr ecei vi ng di st r i but i ons f r om an empl oyer -mandat ed t i p pool ?" ( 698 F3d 104, 118 [ 2d Ci r2012] ) .

The Second Ci r cui t cl ar i f i ed t hat i t di d not i nt end t o " bi nd" us

"t o t he par t i cul ar quest i ons st at ed" and i nvi t ed t hi s Cour t t o

" expand t hese cer t i f i ed i nqui r i es t o addr ess any f ur t her

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per t i nent quest i ons of New Yor k l aw as i t mi ght per t ai n t o t he

par t i cul ar ci r cumst ances pr esent ed i n t hese appeal s" ( i d. ) .

I I .Labor Law 196- d, admi t t edl y not a model of cl ar i t y,

pr ovi des i n r el evant par t as f ol l ows:

" No empl oyer or hi s agent or an of f i cer oragent of any cor por at i on, or any ot her per sonshal l demand or accept , di r ect l y ori ndi r ect l y, any par t of t he gr at ui t i es ,r ecei ved by an empl oyee, or r et ai n any par tof a gr at ui t y or of any char ge pur por t ed t obe a gr at ui t y f or an empl oyee. . . . Not hi ngi n t hi s subdi vi si on shal l be const r ued asaf f ect i ng t he . . . shar i ng of t i ps by awai t er wi t h a busboy or si mi l ar empl oyee. "

The f i r st sent ence of t he st at ut e, adopt ed i n 1968, was

i nt ended t o "end t he unf ai r and decept i ve pr act i ce of an empl oyer

r et ai ni ng money pai d by a pat r on under t he i mpr essi on t hat he i s

gi vi ng i t t o t he empl oyee, not t o t he empl oyer " ( Sami ent o v Wor l d

Yacht I nc. , 10 NY3d 70, 79 n 4 [ 2008] [ i nt er nal quot at i on mar ks

and ci t at i on omi t t ed] ) . The l ast s ent ence, whi ch pr eser ves t i p

shar i ng among wai t er s, busboys and " si mi l ar empl oyee[ s] , " was

added at t he r equest of t he r est aur ant and hot el i ndust r i es t o

pr eser ve t he l egal i t y of commonpl ace t i p- spl i t t i ng pr act i ces i n

t hose busi nesses ( see Mem of I ndus Commr , J une 6, 1968, Bi l l

J acket , L 1968, ch 1007, at 4) .

On t hi s appeal , Bar enboi m and Wi nans f ocus on t he f i r st

sent ence of Labor Law 196- d and, i n par t i cul ar , on t he t er m

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" agent . " 1 Bar enboi m asser t s t hat any super vi sor y responsi bi l i t y,

however sl i ght , r ender s an empl oyee ( such as a shi f t super vi sor )

an agent and, t her ef or e, i nel i gi bl e t o par t i ci pat e i n a t i p pool .Wi nans ar gues t he opposi t e posi t i on, cont endi ng t hat onl y

empl oyees wi t h "f ul l " manager i al aut hor i t y - - i . e. , t he abi l i t y

t o hi r e and f i r e subor di nat es - - shoul d be vi ewed as agent s and,

as a r esul t , assi st ant st or e manager s r emai n el i gi bl e f or t i p

di st r i but i on. Taki ng a di f f er ent t ack, St ar bucks r el i es on t he

f i nal sent ence of t he st at ut e i n cl ai mi ng t hat shi f t super vi sor s

ar e suf f i ci ent l y si mi l ar t o wai t er s, busboys and t he l i ke, and

shoul d be vi ewed as el i gi bl e t o shar e i n t i ps, whi l e assi st ant

st or e manager s, by vi r t ue of t hei r si gni f i cant manager i al

r esponsi bi l i t y, s t and on subst ant i al l y di f f er ent f oot i ng f r om

bar i st as and shi f t super vi sor s, maki ng t hem t i p- pool i nel i gi bl e.

Asi de f r om t he ar gument s of t he par t i es t hemsel ves, t he

New Yor k St at e Depar t ment of Labor ( DOL) appear s as ami cuscur i ae, l endi ng us i t s vi ew of t he case. Li ke St ar bucks, t he DOL

dr aws our at t ent i on t o t he l ast sent ence of Labor Law 196- d and

submi t s t hat i t cont ai ns t he oper at i ve l anguage r el evant t o t i p-

spl i t t i ng pr act i ces. Accor di ng t o t he DOL, empl oyees who ar e

" si mi l ar " t o wai t er s and busboys may shar e i n t i ps whi l e

empl oyees who ar e di ss i mi l ar t o t hose posi t i ons may not . Because

1 The Labor Law el sewhere def i nes an " [ a] gent of acor por at i on" t o i ncl ude, but not be l i mi t ed t o, " a manager ,super i nt endent , f or eman, super vi sor or any ot her per son empl oyedact i ng i n such capaci t y" ( Labor Law 2 [ 8- a] ) .

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t he f i r st cer t i f i ed quest i on, as f r amed by t he Second Ci r cui t ,

cent er s on t he t er m " agent " r at her t han t he phr ase " si mi l ar

empl oyee, " t he DOL suggest s t hat we sl i ght l y r ef or mul at e i t t oask:

" What f act or s det er mi ne whet her an empl oyeei s el i gi bl e or i nel i gi bl e t o r ecei vedi st r i but i ons f r om an empl oyer - mandat ed t i p-spl i t t i ng ar r angement ?"

We accept t he DOL' s r ef r amed f i r st quest i on and now t ur n t o t he

t ask of answer i ng i t . 2

We have r ecogni zed t hat t he DOL' s " i nt er pr et at i on of ast at ut e i t i s char ged wi t h enf or ci ng i s ent i t l ed t o def er ence"

( Sami ent o, 10 NY3d at 79; see al so Mat t er of Chest er f i el d Assoc.

v New Yor k St at e Dept . of Labor , 4 NY3d 597, 604 [ 2005]

[ expl ai ni ng t hat t he " const r uct i on gi ven st at ut es and r egul at i ons

by t he agency r esponsi bl e f or t hei r admi ni st r at i on, i f not

i r r at i onal or unr easonabl e, shoul d be uphel d" ] [ i nt er nal

quot at i on mar ks and ci t at i on omi t t ed] ) . I ndeed, we pr evi ousl y

def er r ed t o t he DOL' s r eadi ng of Labor Law 196- d, t he ver y

2 Not abl y, al t hough t he Second Ci r cui t si ngl ed out t he wor d"agent " i n i t s f i r st quest i on, i t r ecogni zed t he i mpor t of LaborLaw 196- d' s l ast sent ence - - and t he " si mi l ar empl oyee"l anguage - - t o t hi s case t hr oughout i t s opi ni on ( see 698 F3d at106, 109, 111, 113, 115) . We bel i eve t hat i n cer t i f yi ng t hef i r st quest i on, t he Second Ci r cui t was i nt er est ed i n knowi ng bot hwhet her an empl oyee' s super vi sory r esponsi bi l i t i es ar e r el evantt o ascer t ai ni ng t i p- pool el i gi bi l i t y and, i f so, t he poi nt atwhi ch an empl oyee' s aut hor i t y becomes t oo gr eat t o r emai nel i gi bl e t o par t i ci pat e i n a t i p pool . The r ef or mul at ed quest i onaddr esses t hese i nqui r i es.

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st at ut e at t he hear t of t hi s case ( see Sami ent o, 10 NY3d at 79

[ agr eei ng wi t h t he DOL t hat a char ge t hat i s not vol unt ar y may

never t hel ess be a " char ge pur por t ed t o be a gr at ui t y" wi t hi n t hemeani ng of t he f i r st sent ence of sect i on 196- d such t hat t he

empl oyer may not pocket i t ] ) . Hence, our anal ysi s begi ns wi t h

t he DOL' s i nt er pr et at i on of t he t i p- shar i ng l anguage of sect i on

196- d and, i n par t i cul ar , t he meani ng of t he phr ase " si mi l ar

empl oyee. "

I n J anuar y 2011, t he DOL pr omul gat ed t he Hospi t al i t y

I ndust r y Wage Or der ( t he Wage Or der ) , codi f i ed at 12 NYCRR par t

146. As r el evant t o t hi s case, t he Wage Or der cl ar i f i ed and

uni f i ed t he DOL' s t i p- spl i t t i ng pol i ci es pr evi ousl y f ound i n a

pat chwor k of opi ni on l et t er s and a set of wr i t t en gui del i nes

dat i ng back t o 1972. 3 The Wage Or der makes cl ear t hat an

empl oyee' s abi l i t y t o par t i ci pat e i n a t i p pool under t he l ast

sent ence of Labor Law 196- d "s hal l be based upon dut i es and nott i t l es" ( 12 NYCRR 146- 2. 14 [ e] ) . The Wage Or der al so codi f i ed

3 The Wage Or der def i nes t i p shar i ng as " t he pr act i ce bywhi ch a di r ect l y t i pped empl oyee gi ves a por t i on of hi s or hert i ps t o anot her ser vi ce empl oyee or f ood ser vi ce wor ker whopar t i ci pat ed i n pr ovi di ng ser vi ce t o cust omer s and keeps t hebal ance" ( 12 NYCRR 146- 2. 14 [ a] ) . I t descr i bes t i p pool i ng as"t he pr act i ce by whi ch t he t i p ear ni ngs of di r ect l y t i ppedempl oyees ar e i nt er mi ngl ed i n a common pool and t henr edi st r i but ed among di r ect l y and i ndi r ect l y t i pped empl oyees" ( 12NYCRR 146- 2. 14 [ b] ) . I n i t s br i ef , t he DOL not es t hat St ar bucks't i p di st r i but i on pl an "shar es f eat ur es of bot h pr act i ces" andi nt er changeabl y r ef er s t o i t as a pol i cy of t i p shar i ng, t i ppool i ng or t i p spl i t t i ng, as do we.

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t he DOL' s l ongst andi ng const r uct i on of sect i on 196- d as l i mi t i ng

t i p- pool el i gi bi l i t y t o wor ker s who "per f or m, or ass i s t i n

per f or mi ng, per sonal ser vi ce t o pat r ons at a l evel t hat i s apr i nci pal and r egul ar par t of t hei r dut i es and i s not mer el y

occasi onal or i nci dent al " ( i d. ) . I t i s t her ef or e evi dent t hat

empl oyer - mandat ed t i p spl i t t i ng shoul d be l i mi t ed t o empl oyees

who, l i ke wai t er s and busboys, ar e or di nar i l y engaged i n per sonal

cust omer servi ce, a r ul e t hat compor t s wi t h t he " expect at i on[ s]

of t he r easonabl e cust omer" ( Sami ent o, 10 NY3d at 79) .

Mor eover , cont r ar y t o Bar enboi m' s ( i . e. , t he bar i st as' )

posi t i on, t he DOL has consi st ent l y and, i n our vi ew, r easonabl y,

mai nt ai ned t hat empl oyees who r egul ar l y pr ovi de di r ect servi ce t o

pat r ons r emai n t i p- pool el i gi bl e even i f t hey exer ci se a l i mi t ed

degr ee of super vi sor y r esponsi bi l i t y. Bot h t he 1972 gui del i nes

and t he Wage Or der i dent i f y "capt ai ns" as empl oyees who ar e abl e

t o par t i ci pat e i n t i p shar i ng under Labor Law 196- d ( see 12NYCRR 146- 2. 14 [ e] [ 8] [ " capt ai ns who pr ovi de di r ect f ood servi ce

t o cust omer s" ] ) . Mani f est l y, capt ai ns enj oy some super vi sor y

aut hor i t y over ot her wai t st af f , yet such r esponsi bi l i t y does

not , by i t sel f , r ender t hem suf f i ci ent l y di ssi mi l ar t o wai t er s

and busboys so as t o pr ecl ude t hei r par t i ci pat i on i n t i p pool s.

Consequent l y, we cannot agr ee wi t h Barenboi m' s cont ent i on t hat

even t he sl i ght est degr ee of super vi sor y r esponsi bi l i t y

aut omat i cal l y di squal i f i es an empl oyee f r om shar i ng i n t i ps under

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Labor Law 196- d. 4

Bar enboi m r el i es heavi l y on Mat amor os v St ar bucks Cor p.

( 699 F3d 129 [ 1st Ci r 2012] ) i n suppor t of her sect i on 196- dcl ai m, but t hat case i s readi l y di st i ngui shabl e. I n Mat amor os, a

cl ass of bar i st as i n Massachuset t s si mi l ar l y chal l enged

St ar bucks' pol i cy of i ncl udi ng shi f t super vi sor s i n t he communal

t i p pool , ar gui ng t hat i t vi ol at ed t he Massachuset t s Ti ps Act .

That st at ut e, unl i ke sect i on 196- d, cont ai ned an expr ess

l i mi t at i on - - wai t st af f empl oyees coul d onl y shar e t i ps wi t h

f el l ow wai t st af f who had "no manager i al r esponsi bi l i t y" ( i d. at

133) . The Fi r st Ci r cui t hel d t hat t he Ti ps Act cr eat ed a br i ght -

l i ne r ul e excl udi ng empl oyees wi t h any l evel of manager i al

r esponsi bi l i t y, however mi ni mal , f r om t i p shar i ng and concur r ed

wi t h t he bar i st as t hat St ar bucks shi f t super vi sor s coul d not

r ecei ve di s t r i but i ons . I n r eachi ng t hi s concl usi on, t he Fi r s t

Ci r cui t r el i ed on t he unequi vocal l anguage of t he Massachuset t sst at ut e ( see i d. at 134 [ " ' No' means ' no' "] ) as wel l as

4 The Second Ci r cui t quer i ed whet her t he r el evant t i p-spl i t t i ng pr ovi si ons of t he Wage Or der , pr omul gat ed i n 2011,coul d be appl i ed t o t hese 2008 l awsui t s. We di scer n nor et r oact i vi t y pr obl em. Al t hough r et r oact i ve oper at i on of anenact ment i s gener al l y di sf avor ed, r et r oact i ve ef f ect occur s onl ywhen t he enact ment ' s appl i cat i on " woul d i mpai r r i ght s a par t ypossessed when he act ed, i ncr ease a par t y' s l i abi l i t y f or pastconduct , or i mpose new dut i es wi t h r espect t o t r ansact i onsal r eady compl et ed" ( Landgr af v USI Fi l m Prods. , 511 US 244, 280[ 1994] ) . Her e, t he per t i nent por t i ons of t he Wage Or der do notcr eat e new r i ght s or dut i es and merel y el aborat e upon t he DOL' spr eexi st i ng under st andi ng of Labor Law 196- d.

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i nt er pr et i ve gui dance f r om t he Massachuset t s At t or ney Gener al ,

who had l i kewi se const r ued t he pr ovi si on i n a manner consi st ent

wi t h t he bar i st as' cl ai m. I n st ar k cont r ast , New Yor k' s LaborLaw 196- d does not set f or t h a cat egor i cal pr ohi bi t i on agai nst

t i p spl i t t i ng by empl oyees wi t h any i nkl i ng of super vi sor y

r esponsi bi l i t y. Fur t her , t he DOL - - t he agency char ged wi t h t he

enf or cement of sect i on 196- d - - di r ect l y opposes Bar enboi m' s

pr oposed const r uct i on. As such, we decl i ne t o appl y t he anal ysi s

i n Mat amor os.

On t he ot her hand, Wi nans, on behal f of t he ass i st ant

st or e manager s, suggest s t hat empl oyees shoul d be deemed

"si mi l ar " t o wai t er s and busboys - - and el i gi bl e t o shar e i n t i ps

- - so l ong as t hey do not have f ul l or f i nal aut hor i t y t o

t er mi nat e subor di nat es. But we bel i eve t hat t her e comes a poi nt

at whi ch t he degr ee of manager i al r esponsi bi l i t y becomes so

subst ant i al t hat t he i ndi vi dual can no l onger f ai r l y bechar act er i zed as an empl oyee si mi l ar t o gener al wai t st af f wi t hi n

t he meani ng of Labor Law 196- d. We concl ude t hat t he l i ne

shoul d be dr awn at meani ngf ul or si gni f i cant aut hor i t y or cont r ol

over subor di nat es. Meani ngf ul aut hor i t y mi ght i ncl ude t he

abi l i t y t o di sci pl i ne subor di nat es, assi st i n per f or mance

eval uat i ons or par t i ci pat e i n t he pr ocess of hi r i ng or

t er mi nat i ng empl oyees, as wel l as havi ng i nput i n t he cr eat i on of

empl oyee wor k schedul es, t her eby di r ect l y i nf l uenci ng t he number

and t i mi ng of hour s wor ked by st af f as wel l as t hei r

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compensat i on. I n ot her wor ds, cont r ar y t o Wi nans' vi ew, t he

power t o hi r e and f i r e i s not t he excl usi ve t est . The Second

Ci r cui t r ecogni zed t hat t he par t i es' di sput e i n t he Wi nans case" i s mor e l egal t han f act ual , wi t h r esol ut i on dependi ng on whet her

New Yor k vi ews f i nal deci si onmaki ng aut hor i t y as necessar y" ( 698

F3d at 114) . Meani ngf ul aut hor i t y, not f i nal aut hor i t y, shoul d

be t he st andar d.

I n sum, an empl oyee whose per sonal ser vi ce t o pat r ons

i s a pr i nci pal or r egul ar par t of hi s or her dut i es may

par t i ci pat e i n an empl oyer - mandat ed t i p al l ocat i on ar r angement

under Labor Law 196- d, even i f t hat empl oyee possesses l i mi t ed

super vi sor y r esponsi bi l i t i es. But an empl oyee gr ant ed meani ngf ul

aut hor i t y or cont r ol over subor di nat es can no l onger be

consi der ed si mi l ar t o wai t er s and busboys wi t hi n t he meani ng of

sect i on 196- d and, consequent l y, i s not el i gi bl e t o par t i ci pat e

i n a t i p pool . We l eave i t t o t he f eder al cour t s t o appl y t hesepr i nci pl es t o t he Bar enboi m and Wi nans cases. 5

5 J udge Smi t h' s di ssent , gi vi ng no def er ence t o t he DOL,r el i es on a Cal i f or ni a case t o suppor t hi s vi ew t hat Labor Law 196- d has no appl i cat i on t o t he di st r i but i on of a communal t i ppool ( see J ou Chau v St ar bucks Cor p. , 174 Cal App 4t h 688, 94 CalRpt r 593 [ Ct App, 4t h Di st 2009] ) . But t he st at ut e at i ssue i n

J ou Chau cont ai ns no t i p shar i ng l anguage anal ogous t o t he l ast

sent ence of New Yor k' s Labor Law 196- d. Moreover , t he cour t i n J ou Chau st at ed t hat i t s anal ysi s r el at ed sol el y t o St ar bucksshi f t super vi sor s ( i d. at 704- 705 [ "Our r ul i ng i s based onl y ont he par t i cul ar and nar r ow f act s bef or e us" ] ) and acknowl edgedt hat i t s " l egal r easoni ng and concl usi ons woul d not becont r ol l i ng" wer e assi st ant st or e manager s at i ssue ( i d. at 705)

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I I I .

Tur ni ng t o t he second cer t i f i ed quest i on, t he Second

Ci r cui t asks whet her an empl oyer may deny t i p pool di st r i but i onst o an empl oyee who i s never t hel ess el i gi bl e t o spl i t t i ps under

Labor Law 196- d. The second quest i on r el at es t o t he

Wi nans case because, shoul d t he f ederal cour t s det ermi ne t hat

assi st ant st or e manager s ar e el i gi bl e t o par t i ci pat e i n t i p pool s

( on t he basi s t hat t hey do not possess meani ngf ul aut hor i t y) , t he

l egal i t y of St ar bucks ' pol i cy of excl udi ng t hem f r om t he t i p j ar s

woul d be i mpl i cat ed.

The Di st r i ct Cour t i n Wi nans r eached t hi s i ssue and

uphel d St ar bucks' pr act i ce, r easoni ng t hat Labor Law 196- d

mer el y def i nes who i s el i gi bl e or i nel i gi bl e t o j oi n i n a t i p

pool and does not gr ant an ot herwi se el i gi bl e empl oyee an

af f i r mat i ve r i ght t o par t i c i pat e i n t i p pool s or r ecei ve t i p

di s t r i but i ons . Put di f f er ent l y, t he Di s t r i ct Cour t ef f ect i vel yanswer ed t he second quest i on i n t he af f i r mat i ve, hol di ng t hat

Labor Law 196- d excl udes cer t ai n peopl e f r om an empl oyer -

mandat ed t i p pool but does not r equi r e t he i ncl usi on of al l

empl oyees not st at ut or i l y bar r ed f r om par t i ci pat i on. We

gener al l y agr ee wi t h t he Di st r i ct Cour t ' s r eadi ng of t he st at ut e

but l eave open t he possi bi l i t y t hat t her e may be an out er l i mi t

t o an empl oyer ' s abi l i t y t o exci se cer t ai n cl assi f i cat i ons of

empl oyees f r om a t i p pool . For exampl e, t he DOL suggest s t hat an

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empl oyer shoul d not be per mi t t ed t o " gi ve al l of t he

di st r i but i ons f r om a t i p- spl i t t i ng ar r angement t o onl y t he

hi ghest - r anki ng el i gi bl e empl oyee. " We need not r esol ve t hi shypot het i cal scenar i o, however , because i t i s cl ear t hat

St ar bucks' deci si on t o excl ude assi st ant st or e manager s f r om t he

t i p pool i s not cont r ar y t o Labor Law 196- d.

* * *

Accor di ngl y, t he f i r s t cer t i f i ed quest i on, as

r ef or mul at ed, and t he second cer t i f i ed quest i on shoul d be

answer ed i n accor dance wi t h t hi s opi ni on.

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J eana Bar enboi m, J ose Or t i z, et al . v St ar bucks Cor por at i onEugene Wi nans, et al . v St ar bucks Cor por at i on

No. 122

SMI TH, J . ( di ssent i ng i n par t ) :

I agr ee wi t h t he maj or i t y t o t he ext ent t hat I t oo

woul d answer t he Second Ci r cui t ' s quest i ons i n a way f avor abl e t o

St ar bucks and adver se t o pl ai nt i f f s i n bot h cases. I woul d

pr oceed by a si mpl er r out e, however : I t hi nk Labor Law 196- d i s

i nappl i cabl e t o t hi s case. The conduct f or bi dden by t he st at ut e i s t o " demand or

accept . . . any par t of t he gr at ui t i es . . . r ecei ved by an

empl oyee" or t o " r et ai n any par t of a gr at ui t y or of any char ge

pur por t ed t o be a gr at ui t y f or an empl oyee. " I n pl ai ner

l anguage, nei t her t he boss nor ( wi t h some except i ons) a f el l ow

worker may t ake or demand par t of a worker ' s t i ps. No one i s

doi ng t hat i n t hi s case. Thi s case i nvol ves t i ps not gi ven t o

any par t i cul ar empl oyee, but put i nt o a common pool . The onl y

i ss ue i s how t he pool i s t o be shar ed among t he peopl e who ear n

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t he t i ps - - a subj ect on whi ch t he st at ut e has not hi ng t o say.

No doubt , i f St ar bucks i t sel f wer e t aki ng a pi ece of t he pool , or

i f hi gher - l evel empl oyees wer e coer ci ng bar i st as t o gi ve up par tof t he shar e t hat St ar bucks al l ot t ed t hem, t he st at ut e woul d be

t r i gger ed, but t hat i s not what i s goi ng on.

The pur pose of t he st at ut e i s no l ess pl ai n t han i t s

l anguage. As we sai d i n Sami ent o v Wor l d Yacht , I nc. ( 10 NY3d

70, 79 n 4 [ 2008] ) , quot i ng f r om t he l egi sl at i ve hi st or y:

" The dr af t er s of Labor Law 196- d sought t oend t he ' unf ai r and decept i ve pr act i ce' of anempl oyer r et ai ni ng money pai d by a pat r on' under t he i mpr essi on t hat he i s gi vi ng i t t ot he empl oyee, not t o t he empl oyer ' ( see Memof I ndus. Commr . , J une 6, 1968, Bi l l J acket ,L 1968, ch 1007, at 4) . "

Thi s case does not i nvol ve t hat " unf ai r and decept i ve pr act i ce"

or anyt hi ng r esembl i ng i t , and t hat shoul d end t he case.

Some f eder al deci si ons have made t he New Yor k l aw of

t i ppi ng more compl i cat ed t han i t needs t o be by dr awi ng ananal ogy bet ween Labor Law 196- d, a si mpl e pr ohi bi t i on of a

r at her cl ear abuse, and 29 USC 203 ( m) , whi ch deal s wi t h a l ess

si mpl e quest i on of f eder al l aw: t he ext ent t o whi ch an empl oyer

may cr edi t t i ps agai nst t he mi ni mum wage ( see Shahr i ar v Smi t h &

Wol l ensky Rest . Gr oup, I nc. , 659 F3d 234, 241 [ 2d Ci r 2011]

[ " Thus, 29 U. S. C. 203( m) and 196- d bar t he same t ypes of

t i ppi ng pr act i ces, and act i ons t hat vi ol at e t he t i p pool i ng

pr ovi si on of 29 U. S. C. 203 ( m) may al so vi ol at e 196- d" ] ) .

But we ar e not bound by t he f eder al cour t s' i nt er pr et at i on of New

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Yor k l aw, and I woul d not f ol l ow i t her e. I t hi nk mor e usef ul

gui dance can be f ound i n J ou Chau v St ar bucks Cor p. ( 174 Cal App

4t h 688, 94 Cal Rpt r 3d 593 [ 2009] ) , i n whi ch t he cour ti nt er pr et ed Cal i f or ni a Labor Code 351, a st at ut e qui t e si mi l ar

t o our sect i on 196- d. Under t he Cal i f or ni a st at ut e:

" No empl oyer or agent shal l col l ect , t ake, orr ecei ve any gr at ui t y or a par t t her eof t hati s pai d, gi ven t o, or l ef t f or an empl oyee bya pat r on. "

J ou Chau was a cl ass act i on by St ar bucks bar i st as

essent i al l y i dent i cal t o t he Bar enboi m case we have her e. Thecour t di smi ssed t he case, dr awi ng a di st i nct i on bet ween an

empl oyer ' s aut hor i t y t o compel t he shar i ng of a t i p " gi ven t o an

i ndi vi dual ser vi ce empl oyee" and t he aut hor i t y "t o r equi r e

equi t abl e al l ocat i on of t i ps pl aced i n a col l ect i ve t i p box" ( 174

Cal App 4t h at 691, 94 Cal Rpt r 3d at 594- 595 [ emphasi s

omi t t ed] ) . The J ou Chau cour t deci ded t he case wi t hout

i nt er pr et i ng t he t er m " agent " i n Labor Code sect i on 351,

concl udi ng t hat " [ e] ven i f shi f t super vi sor s can be consi der ed

' agent s' . . . St ar bucks di d not vi ol at e sect i on 351 by

per mi t t i ng shi f t super vi sor s t o shar e i n t he t i p pr oceeds t hat

wer e l ef t i n a col l ect i ve t i p box f or bar i st as and shi f t

supervi sor s" ( 174 Cal App 4t h at 696, 94 Cal Rpt r 3d at 598

[ f oot not e omi t t ed] ) . The pol i cy behi nd sect i on 351, t he cour t

expl ai ned, was " t o pr ot ect empl oyees f r om empl oyer s who used

t hei r posi t i ons t o unf ai r l y command a shar e of t he empl oyee' s

t i p" ( i d. ) . Because t he di st r i but i on of a common t i p pool does

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not i mpl i cat e t hat pol i cy, t he cour t hel d sect i on 351 not t o be

vi ol at ed. I woul d adopt a si mi l ar l i ne of r easoni ng her e.

Because I t hi nk t he st at ut e i s i nappl i cabl e, I woul danswer no t o quest i on 1 ( b) ( aski ng whet her Labor Law 196- d

pr ecl udes an empl oyee wi t h super vi sor y or manager i al aut hor i t y

f r om shar i ng i n a common t i p pool ) and yes t o quest i on 2 ( aski ng

whet her an empl oyer may excl ude an ot her wi se el i gi bl e t i p- ear ni ng

empl oyee f r om such a pool ) , and woul d t r eat t he ot her quest i ons

as academi c. The maj or i t y' s cont r ar y appr oach ext ends t he

st at ut e t o a si t uat i on t hat does not i nvol ve t he abuse t he

Legi sl at ur e sought t o pr ohi bi t - - or , as f ar as I can see, any

abuse at al l . Thi s has t he unf or t unat e ef f ect of l eavi ng open a

l ar ge cat egor y of t i ps t o r egul at i on by t he Depar t ment of Labor

and t o l i t i gat i on over when t he t i ps have and have not been

pr oper l y di st r i but ed. What good t hi s does, ot her t han t he f ul l

empl oyment of r egul at or s and of l awyer s, i s not cl ear t o me.

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Bar enboi m, et al . &c. v St ar bucks Cor por at i onWi nans, et al . &c. v St ar bucks Cor por at i on

No. 122

RI VERA, J . ( concur r i ng i n par t , di ssent i ng i n par t ) :

I agr ee wi t h t he maj or i t y' s concl usi on, wi t h r espect t o

t he f i r st quest i on cer t i f i ed f r om t he Uni t ed St at es Cour t of

Appeal s f or t he Second Ci r cui t , t hat an empl oyee who exer ci ses

meani ngf ul aut hor i t y or cont r ol over subor di nat es i s an

empl oyer ' s "agent " i nel i gi bl e t o r ecei ve and r et ai n gr at ui t i es

under Labor Law 196- d. However , based on our answer t o t he

f i r st cer t i f i ed quest i on, t he compl ex f act ual i ssues t hat may

i mpact t he appl i cat i on of sect i on 196- d as suggest ed by t he

maj or i t y' s di scussi on of t he second cer t i f i ed quest i on, and t he

cur r ent post ur e of t he Wi nans case i n t he f eder al cour t s, I woul d

decl i ne t o answer t he second cer t i f i ed quest i on.Our answer t o t he f i r st cer t i f i ed quest i on set s f or t h

t he "meani ngf ul aut hor i t y st andar d" as t he pr oper st andar d t o

det er mi ne whet her an empl oyee i s an agent of t he empl oyer under

sect i on 196- d. The appl i cat i on of t hat st andar d i n Wi nans i s

l ef t t o t he f eder al cour t s, and t he Second Ci r cui t may deci de t he

appeal based sol el y on our answer t o t he f i r st cer t i f i ed

quest i on, obvi at i ng t he need t o consi der t he maj or i t y' s answer t o

t he second cer t i f i ed quest i on.

The maj or i t y' s answer t o t he second cer t i f i ed quest i on,

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" whet her an empl oyer may deny t i p pool di st r i but i ons t o empl oyees

el i gi bl e t o spl i t t i ps under Labor Law 196- d" ( maj op at 15) ,

i s qual i f i ed. The maj or i t y asser t s i t s gener al agr eement wi t ht he Di st r i ct Cour t t hat sect i on 196- d does not mandat e i ncl usi on

of al l empl oyees not st at ut or i l y bar r ed f r om par t i ci pat i on, but

" l eave[ s] open t he possi bi l i t y t hat t her e may be an out er l i mi t

t o an empl oyer ' s abi l i t y t o exci se cer t ai n cl assi f i cat i ons of

empl oyees f r om a t i p pool " ( i d. ) . That i s , t he maj or i t y

r ecogni zes t hat t her e ar e st at ut or y r ei ns on t he empl oyer ' s

at t empt s t o excl ude t i p el i gi bl e empl oyees f r om t he t i p pool .

However , t he maj or i t y r ef r ai ns f r om consi der i ng t he st at ut or y

boundar i es because i t concl udes t hat St ar bucks' pol i cy t o excl ude

assi st ant st or e manager s f r om t he t i p pool "i s not cont r ar y t o

t he st at ut e" ( i d. ) . Thi s det er mi nat i on must r est on t he

maj or i t y' s concl usi on t hat assi st ant st or e manager s have t he t ype

of meani ngf ul aut hor i t y or cont r ol over subor di nat es maki ng t hi scl ass of empl oyees i nel i gi bl e t o par t i ci pat e i n t he t i p pool . I f

t hat i s t he maj or i t y' s concl usi on, t hen i t does not mat t er what ,

i f any, di scr et i onar y aut hor i t y t he empl oyer may have under

sect i on 196- d t o excl ude an ot her wi se el i gi bl e empl oyee. Put

ot her wi se, t he maj or i t y' s suggest i on t hat assi st ant st or e

manager s ar e empl oyer ' s agent s i nel i gi bl e t o par t i ci pat e i n a t i p

pool r ender s unnecessar y i t s f ur t her consi der at i on of t he second

cer t i f i ed quest i on.

I f t hat i s not t he l ogi cal i mpor t of t he maj or i t y' s

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assessment of t he St ar bucks pol i cy i n Wi nans, t hen at a mi ni mum,

t he maj or i t y l eaves t oo much unsai d about t he boundar i es

pot ent i al l y appl i cabl e her e. As t he Depar t ment of Labor not es,t her e r emai n cr uci al f act ual i ssues t hat wei gh i n f avor of

decl i ni ng t hi s quest i on. * As i t cur r ent l y st ands, t he r ecor d

i ndi cat es t hat al l f our cl asses of St ar bucks empl oyees ar e gar bed

i n si mi l ar uni f or ms and engaged i n cust omer ser vi ce dut i es.

Thus, whet her t he cust omer ser vi ce r esponsi bi l i t i es of an

assi st ant st or e manager const i t ut e a pr i nci pal or r egul ar par t of

hi s or her dut i es r emai ns unr esol ved, and t he pr opr i et y of

St ar bucks' t i ppi ng pol i cy t ur ns on f act ual i ssues per t ai ni ng t o

t he appr opr i at e cl assi f i cat i on of assi st ant st or e manager s as

ei t her empl oyer ' s agent s, or t i p- el i gi bl e empl oyees.

I bel i eve t he mor e pr udent cour se i s f or us t o al l ow

t he Second Ci r cui t t o consi der t he possi bl e appl i cabi l i t y of our

answer t o t he f i r st cer t i f i ed quest i on t o t he Wi nans case, and t odecl i ne t o answer t he second cer t i f i ed quest i on. Gi ven t hat t he

f eder al cour t s may r esol ve t he case wi t hout r ef er ence t o our

answer , and because t he maj or i t y' s r esol ut i on of t he second

quest i on r ai ses, wi t hout addr essi ng, cer t ai n undef i ned par amet er s

of t he s t at ut e, I j oi n i n t he maj or i t y' s answer t o t he f i r s t

* I f we wer e t o be pr esent ed wi t h t hi s quest i on i n t hef ut ur e, we woul d al so benef i t f r om mor e ext ensi ve br i ef i ng by t heDepar t ment of Labor based upon a f ul l y devel oped f act ual r ecor d( see Sami ent o v Wor l d Yacht , I nc. , 10 NY3d 70, 79 [ 2008] ; Mat t erof Chest er f i el d Assoc. v New Yor k St at e Dept . of Labor , 4 NY3d597, 604 [ 2005] ) .

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cer t i f i ed quest i on and di ssent f r om i t s answer t o t he second ( see

Yesi l v Reno, 92 NY2d 455, 456- 457 [ 1998] ; Ret ai l Sof t war e

Ser vi ces, I nc. v Lashl ee, 71 NY2d 788 [ 1988] ) .* * * * * * * * * * * * * * * * *

Fol l owi ng cer t i f i cat i on of quest i ons by t he Uni t ed St at es Cour tof Appeal s f or t he Second Ci r cui t and accept ance of t he quest i onsby t hi s Cour t pur suant t o sect i on 500. 27 of t he Rul es of Pr act i ceof t he New Yor k St at e Cour t of Appeal s, and af t er hear i ngar gument by counsel f or t he par t i es and consi der at i on of t hebr i ef s and t he r ecor d submi t t ed, cer t i f i ed quest i ons answer ed i naccor dance wi t h t he opi ni on her ei n. Opi ni on by J udge Gr af f eo.Chi ef J udge Li ppman and J udges Read, Pi got t and Abdus- Sal aamconcur . J udge Smi t h di ssent s i n par t i n an opi ni on. J udgeRi ver a di ssent s i n par t i n a separ at e opi ni on.

Deci ded J une 26, 2013

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Starbucks Tip Pooling

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