FACT SUMMARY Starbucks operates more than 6,500 retail coffee stores in the United States. Each store is staffed by “partners” including entry-level baristas, shift supervisors, assistant store managers (ASMs), and store managers. In October 2002, Starbucks changed the job description for ASMs to include routine tasks including service, cleaning, and other non-management tasks, and reclassified them for purposes of the FLSA from “exempt” to “nonexempt.” This made all ASMs throughout the country eligible for overtime. Although Starbucks anticipated that ASMs would continue to work more than 40 hours after the reclassification, it did not increase store labor budgets and store managers were discouraged from allowing workers overtime. Several ASMs contended that the new job responsibilities could not be completed in 40 hours and that Starbucks managers enforced an unwritten policy of encouraging or allowing ASMs to work “off-the-clock” (perform the job responsibilities without being compensated) in order to control overtime costs. One ASM testified that a district manager informed her that her job needs to get done, “regardless of how long it takes.” Falcon and other ASMs filed suit claiming that Starbucks violated the FLSA. Starbucks contended that it had a written policy prohibiting off-the-clock work and filed a motion for summary judgment.

SYNOPSIS OF DECISION AND OPINION The Federal District Court ruled in favor of Falcon and denied Starbucks’s motion for summary judgment. The court held that significant evidence showed ASMs either worked off-the-clock or that time was taken off if they attempted to record all of their hours. There was a strong showing that (1) ASM job duties were not easily completed within 40 hours while overtime was strongly discouraged, (2) labor budgets were not increased, and (3) manager bonuses were based, in part, on limiting overtime hours. Despite an official “time worked is time paid” policy, Starbucks created an environment that encouraged FLSA violations. A policy of discouraging overtime, while not unlawful, could, together with other factors, lead to a consistent pattern of violations.

WORDS OF THE COURT: Motivation to Violate the FLSA “Plaintiffs have also provided significant evidence in support of their claim that [they] either worked off-the-clock or had time shaved off of their hours by Store Managers when they attempted to record all of the hours they actually worked. Finally, Plaintiffs have made a strong showing that Starbucks’ general policy of requiring ASMs to perform job duties that could not easily be completed within 40 hours while, at the same time, strongly discouraging overtime after the reclassification, failing to increase labor budgets, and basing bonuses, at least in part, on labor hours created an environment that at least strongly motivated managers to commit the alleged FLSA violations.”

Why does the court consider it important that Starbucks did not increase store budgets when they reclassified the ASMs as nonexempt?