Starbucks 2007 Annual Report Download - page 70

Company, if any. Trial is currently set for February 2008. The Company believes its practices comply with
California law, and the Company intends to vigorously defend the lawsuit.
On March 11, 2005, a former employee of the Company filed a lawsuit, entitled James Falcon v. Starbucks
Corporation and Does 1 through 100, in the U.S. District Court for the Southern District of Texas claiming that the
Company violated requirements of the FLSA. Specifically, the plaintiff claims that the Company misclassified its
retail assistant store managers as exempt from the overtime provisions of the FLSA and that each assistant manager
therefore is entitled to overtime compensation for any week in which he or she worked more than 40 hours during
the three years before joining the suit as a plaintiff, and for as long as they remain an assistant manager thereafter.
On August 18, 2005, the plaintiff amended his complaint to include allegations that he and other retail assistant store
managers were not paid overtime compensation for all hours worked in excess of 40 hours in a work week after they
were re-classified as non-exempt employees in September 2002. In both claims, Plaintiff seeks to represent himself
and a putative class of all current and former assistant store managers employed by the Company in the United
States from March 11, 2002 until the present. He also seeks, on behalf of himself and the class, reimbursement for an
unspecified amount of unpaid overtime compensation, liquidated damages, injunctive relief, and attorneys’ fees and
costs. On September 13, 2005, the plaintiff filed a motion for conditional collective action treatment and court-
supervised notice to all putative class members under the opt-in procedures in section 16(b) of the FLSA. On
November 29, 2005, the court entered an order authorizing notice to the class of the existence of the lawsuit and
their opportunity to join as plaintiffs. The Company has a policy requiring that all non-exempt partners, including
assistant store managers, be paid for all hours worked, including any hours worked in excess of 40 per week. The
Company also believes that this policy is, and at all relevant times has been, communicated and followed
consistently. Further, the Company believes that the plaintiff and other assistant store managers were properly
classified as exempt under the FLSA prior to September 2002. The Company cannot estimate the possible loss to the
Company, if any, and believes that a loss in this case is unlikely. Trial is currently set for February 2008. The
Company intends to vigorously defend the lawsuit.
On June 30, 2005, three individuals, Erik Lords, Hon Yeung, and Donald Brown filed a lawsuit in Orange County
Superior Court, California. The lawsuit alleges that the Company violated the California Labor Code section 432.8
by asking job applicants to disclose at the time of application convictions for marijuana related offenses more than
two years old. Plaintiffs also seek attorneys’ fees and costs. On November 1, 2007, the Court issued an order
certifying the case as a class action, with the plaintiffs representing a class of all persons who have applied for
employment with Starbucks Coffee Company in California since June 23, 2004 who cannot claim damages in
excess of $200. The Company cannot estimate the possible loss to the Company, if any. No trial date has been set.
The Company believes its employment application complies with California law, and the Company intends to
vigorously defend the lawsuit.
The Company is party to various other legal proceedings arising in the ordinary course of its business, but it is not
currently a party to any legal proceeding that management believes would have a material adverse effect on the
consolidated financial position or results of operations of the Company.
Note 18: Segment Reporting
Segment information is prepared on the same basis that the Company’s management reviews financial information
for operational decision making purposes. Starbucks has three reportable operating segments: United States,
International and CPG.
United States
The Company’s United States operations represent 82% of total Company-operated retail revenues, 56% of total
specialty revenues and 78% of total net revenues for fiscal year 2007. United States operations sell coffee and other
beverages, complementary food, whole bean coffees, and coffee brewing equipment and merchandise primarily
through Company-operated retail stores. Specialty Operations within the United States include licensed retail
stores, foodservice accounts and other initiatives related to the Company’s core business.
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