Is Western Michigan University Starbucks Violating Labor Laws?

UPDATE: A Western Michigan University Starbucks just got exposed on TikTok for tipping employees with Starbucks gift cards.

After 4 long years of construction the new student center along with a new Starbucks opened just 6 weeks ago.  The students were very excited about the new Starbucks. However, it sounds like employees of that Starbucks are losing their excitement.

A person whom we have confirmed to be an employee of the Starbucks at the WMU student center in Kalamazoo posted a TikTok earlier this week making a shocking accusation.  The employee claims that the Starbucks managed by University Dining Services is tipping their employees with Starbucks gift cards. The video currently has 41 thousand views but is likely to go viral over the weekend.

Get our free mobile app

Federal Labor Laws state that the tip belongs to the employee, not the employer.  Michigan law is slightly more complicated according to Medium.com,

A tip credit is in place where all or part of the employee’s tips are counted toward their minimum wage requirements. Michigan does allow employers to take a tip credit.

The Michigan state labor law seems to have a gray area in this regard.  However, an employee cannot pay their bills with a Starbucks gift card.  Furthermore, the customer decides how much to tip an employee for their service.  Does the customer know that the employee isn't getting that money?  Is it right that in the end, all of that tip money goes back into the pockets of the owner of this Starbucks instead of the employee it was intended for?

The employee states that this store is not owned by Starbucks.  That fact was confirmed in a response from a member of the Starbucks Corporate team,

The employee is correct in that the store is operated by a licensee, and that the baristas are employees of the licensee rather of Starbucks. As such, all decisions regarding compensation, including tipping, are the responsibility of the licensee.. It would be inaccurate to say that “Starbucks is tipping their employees with Starbucks gift cards.”

This Starbucks managed by University Dining Services is very new. The operations are currently determining procedures for collecting tips and how to distribute them in an equitable and fair manner. Thus far, less than $300 in pooled tip proceeds have been distributed to a little more than a dozen baristas (who are student employees). These pooled tips were collected during the weekslong training and soft opening period the students worked.

A student more recently onboarded raised a question about how tips are disbursed and management then decided to put a pause on accepting tips while they determine how best to handle tipping at this location.

What do you think?  Is it legal or ethical to tip Starbucks employees with Starbucks gift cards?  Is denying the student employees tips after this story broke the correct way to handle the situation?  Let us know your thoughts in the comments.