A couple of weeks ago, Starbucks was in the news, ordered by a California judge to cough up a bunch of cash related to practices surrounding tips. The hits keep on coming for companies who compensate a portion of their workforce related to tips.
Today's jury verdict related to tips? American Airlines was ordered to pay 9 skycaps in Boston 325K for lost tips when the airline imposed a $2 per bag surcharge for curbside check-in. From the Boston Globe:
"A federal jury yesterday ordered American Airlines to pay nine skycaps at Logan International Airport a total of more than $325,000 for tips they lost when the airline began charging passengers $2 a bag for curbside check-in service in late 2005.
In what is believed to be the first legal challenge of baggage fees imposed by several airlines in recent years, the jury in US District Court in Boston found that American Airlines violated the state's tips law by keeping the $2 fees. The jury also found that the airline had made it harder for skycaps to earn a living.
"We're very pleased that the jury saw what American Airlines is doing here, which is digging into the pockets of some of its lowest-paid workers to boost its own profits," said Shannon Liss-Riordan, who represented the skycaps, several of whom hugged one another and brushed away tears after the verdict.
Since the fee went into effect in September 2005, skycaps testified, daily tips have plunged because many customers mistakenly thought the workers keep the $2 fee charged for handling bags at the curb and were reluctant to tip on top of it. One of the skycaps testified that his daily tips fell from about $200 to about $70 or $80."
Interesting verdict. Solid comp professionals keep an eye out for the impact of business decisions on total comp, but this is the first decision I can recall that questions a company's ability to establish prices for services.
Also - by my math a skycap earning $200 a day in tips with a $5.15 hourly rate is earning about 60K a year. WOW - I didn't expect that. Shout out to all my peeps with multiple degrees who aren't earning that... Once you cut it to $80 a day, I come up with total comp in the 34-35K range, which still seems OK... But $60K?
My standard for the skycap tip was always a buck a bag, minimum of $5. That's how I roll. Of course, I never saw the surcharge....
Who's next? Doormen? The Valet?