Feb 16, 2023
Starbucks Is Winning the Fight Against Unions
(Bloomberg) -- On the surface, it may appear Starbucks Corp.’s drawn-out fight with labor activists pushing to unionize its US cafes isn’t going well.
The National Labor Relations Board has ruled multiple times that the coffee chain has broken the law. (The company denies any violations.) Senator Bernie Sanders is accusing the coffee giant of union busting, calling on interim Chief Executive Officer Howard Schultz to testify at a hearing. And the fight has tarnished Starbucks’s carefully cultivated status as a progressive employer, developed over decades.
But changes in the company’s strategy are unlikely, experts say.
“There will likely be more NLRB rulings against Starbucks — I don’t think the rulings will have much impact on Starbucks’s behavior,” said Kevin Reuning, a political science professor at Miami University, who has mapped and followed the baristas’ efforts to organize. “I expect them to keep pushing as hard as they can to stop any organizing.”
While the union drive has now reached almost 280 stores, growth has markedly slowed from late 2021, when it began in earnest. From November through January, only about 20 locations have voted to unionize, compared with roughly 180 in the April-through-June period.
That indicates the company’s strategy — which also includes raising wages and benefits to dim the union’s appeal — is paying off where it matters most. Couple that with labor courts that have limited capability to punish violations in a meaningful way, and there’s little incentive for Starbucks to change its stance.
“The problem is that, even when found guilty, the costs to Starbucks are very low,” Reuning said.
On Feb. 13, a NLRB panel ordered Starbucks to reinstate two terminated employees and give them back pay. The company must also refrain from actions such as using surveillance on workers engaged in collective action and discriminating against baristas for supporting the union. Starbucks denies any wrongdoing in the case, which predates the recent organizing drive. It’s likely to challenge the labor board’s decision in federal appeals court.
“We disagree with the decision and are considering all options to obtain a full legal review of the matter,” a Starbucks spokesperson said in an email.
Separately, an NLRB judge ruled in October that a Michigan employee was illegally fired, ordering reinstatement and backpay, as well as meetings on workers’ rights. Starbucks has denied wrongdoing.
NLRB regional directors around the country have issued dozens of pending complaints accusing Starbucks of breaking labor laws by threatening workers and retaliating against activists. The complaints are considered by agency judges, whose rulings can be appealed to the NLRB members in Washington and then to federal court, a process that can drag on for years.
That puts time on the side of the company. The NLRB also has limited ability to levy fines, said Nelson Lichtenstein, a labor historian at the University of California at Santa Barbara.
“The series of illegalities that they commit, there’s no cost to them,” he said, referring to big companies’ ability to effectively ignore NLRB rulings. “There’s no large fines. There’s no people going to jail,” he said.
When labor laws began coming into effect nearly 100 years ago, “companies didn’t want to be labeled antiunion,” Lichtenstein said, and that was enough to keep them within the law. “That was true for a few decades, but it’s certainly not true today,” he said.
Pivoting Under Schultz
The chain’s efforts to fight back the union have gained steam since Schultz unexpectedly came out of retirement in 2022 to replace former CEO Kevin Johnson. He quickly shuffled management’s ranks — including the dismissal of the company’s general counsel — and blasted past management for “false promises” to employees.
Workers United, the organizing union at Starbucks, said the coffee chain refuses “to work in good faith with their partners to improve working conditions.”
“Starbucks continues to be exposed as a ruthless union-buster, failing to uphold the ‘progressive’ values it touts as a marketing tactic,” Workers United said in a statement.
Laxman Narasimhan will replace Schultz in April, with Schultz staying on the board. The new chief isn’t expected to change course on the union issue.
“I would be wildly surprised if the new CEO changed anything about their view on unionization,” said BTIG LLC analyst Peter Saleh. “I don’t believe he’s going to have that leeway or authority to do anything like that.”
The Starbucks spokesperson said the board and executives are “aligned in our belief that we can achieve more together by working side-by-side with our partners.”
Along with the wage hikes and other benefits, Starbucks has added an option to tip baristas through its mobile app. Average wages now stand at about $17.50 an hour now in the US, up from $17 in August.
Related: Starbucks offers new perks for non-union stores
Restaurant workers have struggled to unionize in the past, with their efforts coalescing into the Fight for $15 movement. Some locations are especially difficult to organize, such as those under the McDonald’s Corp. brand, since a majority of locations are operated by franchisees instead of the parent company.
Union drives have intensified in recent years, including successful campaigns at Amazon.com Inc. and Trader Joe’s voting in favor of a union. Tesla Inc. workers in New York state are also launching a unionization campaign. Even so, recent data show a decline in US union membership.
Starbucks’s recent sales success in the US shows that customers have largely tuned out the union push.
“Consumers just don’t seem to care about this,” Saleh said.
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