Sarah Verduzco, recently brought a PAGA action against Starbucks for civil penalties on behalf of all current and former aggrieved employees that worked for the coffee giant. The plaintiff didn’t seek to recover anything other than penalties as permitted by California Labor Code § 2699. To the extent that statutory violations are mentioned for wage violations, plaintiff didn’t seek underlying general and/or special damages for those violations.
Background
Verduzco was employed by Starbucks in California from 2014 until the end of 2024. She was at all times classified as a non-exempt employee, paid on an hourly basis, and entitled to the legally required meal and rest periods and payment of minimum and overtime wages due for all time worked.
In the action, Verduzco also specifically asked about Starbucks' treatment of employees' incentive pay when calculating overtime pay. According to Verduzco, the company had a non-discretionary incentive program that gave incentive wages to employees based on their performance. All hourly employees were eligible for this program. In hiring interviews, Starbucks said the incentive program was part of the compensation package. But when Starbucks determined the regular rate of pay to use in calculating overtime pay rates and meal/rest break premiums (for missed breaks), it didn’t include the incentive wages. Verduzco said that this was a labor law violation.
Verduzco alleged that Starbucks engaged in some day-to-day operating practices that violated labor law and negatively impacted employees. This included the fact that employees occasionally were (required to work while they were clocked out on their off-duty meal break; that Starbucks had a policy of rounding employees' actual time worked to give them less pay than if the company paid them for the actual hours they worked; and because employees were required to submit to mandatory COVID-19 screenings before starting their shifts, employees were said to have been subjected to additional off-the-clock hours.
Verduzco said in the Complaint that Starbucks also failed to provide the plaintiff and the other aggrieved employees with complete and accurate wage statements which failed to show, among other things, the correct gross and net wages earned. In addition, the Complaint stated that Starbucks underpaid sick pay wages to the plaintiff and the other aggrieved employees by failing to pay such wages at the regular rate of pay in violation of California Labor Code § 246.
The lawsuit against Starbucks Corporation is currently pending in the Alameda County Superior Court.
Takeaway
Bonuses or incentives that are non-discretionary—that is, promised in advance and linked to measurable goals—they have to be part of the employee’s regular rate of pay. That higher rate is used to calculate overtime and missed-break premiums. As seen in this action, by excluding incentive pay, the Starbucks workers claim that the practice falsely drops overtime wages and violates California labor law.
Employers should remember that rest periods must be totally “off-duty,” and that employees are to be removed from all work duties and employer control. If the employer calls an employee back to work or keeps him or her “on stand-by” during a break, the time doesn’t count as a lawful rest period, and the employee is owed premium pay.
Finally, if the mandatory health screenings are required, and employees aren’t permitted to clock in first, that waiting time must be seen as “hours worked.” State law requires workers to be compensated for all hours when the employer controls their activities, such as health screenings. If this isn’t followed, employees may be entitled to back pay, penalties, and interest for any off-the-clock time.