Posted on August 5, 2009 by Duke Tufty

Quick casual restaurants and coffee shops are increasingly adding alcohol to their menu. Should you?

Quick casual restaurants, such as Chipotle Mexican Grill, Burgerville, and Subway, and coffee shops, including Starbucks, are adding alcohol to their menus to attract customers and increase sales. Burgerville recently added wine and beer to one of its restaurants in Vancouver, Washington. Starbucks announced in July that it is re-branding one of its existing locations in Seattle to 15th Avenue Coffee and Tea and will offer wine and beer as part of this effort.

Before you jump on the bandwagon, make sure you understand what is involved in obtaining a liquor license and how it may impact your employees, operations, management and costs.

The Application. Obtaining a liquor license can be a complex, expensive process if problems arise. State liquor control commissions frequently require substantial disclosures from all owners of the business. If an applicant has had financial, legal or personal troubles or fails to disclose material information as required by state law, they may not be approved. Prospective applicants should conduct a self-assessment to identify any potential red flags before submitting an application and consult an experienced attorney to address any such issues proactively. Once the applicant receives their license, they are a “licensee” and subject to the state’s alcohol regulatory framework. For more information about how to obtain a liquor license in Oregon, visit http://www.oregon.gov/OLCC/how_to_get_a_liquor_license.shtml.

Employees. Each state has different requirements regarding the requirements for individuals that are involved in the preparation and sale of alcoholic beverages. Most states require that such individuals take a class, pass an exam and receive approval from the state liquor control commission.

In Oregon, all employees that mix, sell or serve alcohol, or that supervise others that mix, sell or serve alcohol, must have a service permit. This includes employees that ring up checks with alcohol on them, collect money from customers for alcohol, or delivery drinks to a table. To obtain a service permit, the employee must be at least 18 years old, complete an Alcohol Server Education Class and submit all the required paperwork and fees. Special restrictions apply to service permittees under the age of 20.

Operations. Licensees operating quick casual restaurants or coffee shops may need to restructure their operations to ensure compliance. It’s likely that not all of a licensee’s employees will have service permits and that some may be under 21, or even under 18. The licensee is ultimately responsible for any violation and must ensure that operations do not inadvertently result in violations. For example, individuals without server permits and those under 18 are categorically prohibited from mixing, selling or serving alcohol. Licensees are responsible for establishing policies and procedures that satisfy the state’s alcohol regulatory regime.

Ongoing Compliance. Adding a liquor license to an establishment often requires greater management oversight. Violations are time consuming and expensive, and fees and penalties typically escalate for repeat offenses. A history of violations is not only expensive, but often draws greater attention from enforcement agents and, ultimately, jeopardizes the license.

Licensees often need to have a stronger management presence at the premise to ensure compliance. Common violations are serving alcohol to minors and failure of an employee to have a non-expired service permit. However, there are many more potential pitfalls and each state presents its own unique set of rules and prohibitions. New licensees often learn the hard way when they first receive their license. The best practice is to implement a comprehensive alcohol service policy and to conduct regular, on-going trainings. Although adding alcohol to the menu generally results in increased sales, it also involves increased costs as well.

In sum, adding alcohol to the menu is often an attractive proposition, but it is not a panacea and should not be undertaken lightly. Those considering adding alcohol to their quick casual restaurant and coffee shop should look before they leap and fully understand the legal requirements of their state.

We can help in Oregon, Washington and California, or provide a reference to an attorney in any other state.
 

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Posted on June 17, 2009 by John LeCrone

Starbucks Brews a Winning Cup: Tip Pooling in California Restaurants

On June 2, 2009, a California appellate court upheld Starbucks’ mandatory tip-sharing policy, saying that Starbucks does not have to pay $100 million in additional wages to its baristas.

Reversing a trial court judgment, the Court of Appeal held that Starbuck’s policy requiring that tips be divided between baristas and “shift supervisors” who work along side them is permissible under California Labor Code Section 351.

 

In Chau v. Starbucks, the trial court had previously ruled that that Starbucks’ policy of mandatory tip sharing violated Section 351 because it required baristas to share tips with their shift supervisors, who occasionally directed other employees and, according to the trial court, were “agents” of Starbucks and not permitted to receive tips under California Labor Code section 351.

Section 351 states that an employer or its agent cannot take or receive any part of a gratuity, and that gratuities are the sole property of the employee or employees to whom they were paid, left or given.

The Court of Appeal reversed the Chau decision, finding that shift supervisors, like baristas, primarily served customers, had minimal supervisory duties and were indistinguishable by customers from other baristas, and had no authority to hire, fire, review performance or discipline other employees.

Since both baristas and shift supervisors served customers as a “team,” the court found that tips, placed in collection boxes at cash registers, reasonably belonged to all of them. The court also found that dividing tips amongst employees in proportion to hours worked, under Starbuck’s policy, was fair and equitable.

In reaching its decision, the court ruled that Section 351 prohibits management from taking tips from employees; it does not forbid an employer from requiring that tips be shared with other employees in customer service positions. The court stated that “Starbucks did not violate section 351 by permitting shift supervisors to share in the tip proceeds that were left in a collective tip box for baristas and shift supervisors.”

Although the Starbucks court expressly limited its findings to the facts of that case, the decision follows several other recent rulings expanding permissible tip pooling to include for most employees in the chain of service to customers, including busboys (Leighton v. Old Heidelberg, Ltd.), bartenders (Budrow v. Dave & Buster’s of California, Inc.), and kitchen staff and dishwashers (Etheridge v. Reins Int’l California, Inc.).

Employers with questions about tip sharing or pooling requirements under California law should review their policies with counsel.

Contacts:
John LeCrone
Janet Grumer

Disclaimer: This advisory is a publication of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

 

 

This decision is good news for California employers that allocate tips left by customers at a common collection point to reward team service.
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Posted on June 17, 2009 by John LeCrone

Starbucks Brews a Winning Cup: Tip Pooling in California Restaurants

On June 2, 2009, a California appellate court upheld Starbucks’ mandatory tip-sharing policy, saying that Starbucks does not have to pay $100 million in additional wages to its baristas.

Reversing a trial court judgment, the Court of Appeal held that Starbuck’s policy requiring that tips be divided between baristas and “shift supervisors” who work along side them is permissible under California Labor Code Section 351.

 

In Chau v. Starbucks, the trial court had previously ruled that that Starbucks’ policy of mandatory tip sharing violated Section 351 because it required baristas to share tips with their shift supervisors, who occasionally directed other employees and, according to the trial court, were “agents” of Starbucks and not permitted to receive tips under California Labor Code section 351.

Section 351 states that an employer or its agent cannot take or receive any part of a gratuity, and that gratuities are the sole property of the employee or employees to whom they were paid, left or given.

The Court of Appeal reversed the Chau decision, finding that shift supervisors, like baristas, primarily served customers, had minimal supervisory duties and were indistinguishable by customers from other baristas, and had no authority to hire, fire, review performance or discipline other employees.

Since both baristas and shift supervisors served customers as a “team,” the court found that tips, placed in collection boxes at cash registers, reasonably belonged to all of them. The court also found that dividing tips amongst employees in proportion to hours worked, under Starbuck’s policy, was fair and equitable.

In reaching its decision, the court ruled that Section 351 prohibits management from taking tips from employees; it does not forbid an employer from requiring that tips be shared with other employees in customer service positions. The court stated that “Starbucks did not violate section 351 by permitting shift supervisors to share in the tip proceeds that were left in a collective tip box for baristas and shift supervisors.”

Although the Starbucks court expressly limited its findings to the facts of that case, the decision follows several other recent rulings expanding permissible tip pooling to include for most employees in the chain of service to customers, including busboys (Leighton v. Old Heidelberg, Ltd.), bartenders (Budrow v. Dave & Buster’s of California, Inc.), and kitchen staff and dishwashers (Etheridge v. Reins Int’l California, Inc.).

Employers with questions about tip sharing or pooling requirements under California law should review their policies with counsel.

Contacts:
John LeCrone
Janet Grumer

Disclaimer: This advisory is a publication of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

 

 

This decision is good news for California employers that allocate tips left by customers at a common collection point to reward team service.
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