Unionized Starbucks workers won’t have access to improved benefits the company is considering, CEO Howard Schultz told store leaders in an online forum on Monday.
At the time of his comments, nearly 200 Starbucks stores in 30 states had filed petitions with the National Labor Relations Board (NLRB), seeking to hold union elections.
Schultz told store management that the company is considering expanding benefits to combat attrition and to help recruit baristas, and he cited U.S. labor law requirements that employers negotiate pay and benefits separately with unionized workers. His comments were first reported by the Wall Street Journal.
Is it really legal for a major employer like Starbucks, with nearly 400,000 workers in the U.S. alone, to offer such a two-tiered benefits system, effectively punishing workers for choosing to unionize?
“It’s technically correct,” Cathy Creighton, director of the Buffalo co-lab at Cornell’s school for industrial and labor relations, told Fortune. Once workers vote to unionize, she says, their employer must indeed negotiate with them before instituting changes to things like benefits and wages.
However, she says, nothing prevents a company from offering unionized workers those same benefits. If the company wanted to, it could go to each unionized store and ask if they want improved benefits or wages, while continuing to bargain for an overall contract. “If the union said yes, then they could sign a short agreement, or just a handshake deal. That would be sufficient, it doesn’t even have to be in writing.”
After Schultz rejoined Starbucks last month, he oversaw some changes in Starbucks’ legal team ahead of this new strategy. General counsel Rachel Gonzalez is set to leave the company on May 20, having been in the role since 2018, according to an SEC filing. The company still retains counsel from major labor and employment law firm Littler Mendelson.
‘It’s a complicated issue’
Creighton, who is a former NLRB lawyer, says tactics like Schultz’s are common among employers engaged in union avoidance campaigns, and they typically argue that unions stand in the way of improved benefits. The tactic could also be illegal, depending on the circumstance: the National Labor Relations Act (NLRA) prohibits employers from promising benefits to employees on the condition that they reject a union.
Even though Schultz did not target specific stores that have gone public with union drives or have already won election dates with the NLRB, his comments could potentially interfere with election outcomes. Creighton says it’s possible Workers United, the union seeking to represent Starbucks workers, will file an unfair labor practice charge with the NLRB over Schultz’s move.
“It’s a complicated issue,” John Logan, director of labor and employment studies at San Francisco State University, told Fortune. “And will partly depend on how the NLRB were to interpret Starbucks’ intent and whether the [benefits] change was motivated by any anti-union animus.”
In a public statement released on Sunday, Schultz addressed his first week back as CEO, and acknowledged the company had made some “missteps,” but he continued to emphasize his belief that the company can become a better version of itself without unions: “We must not be distracted by the different vision [of Starbucks] being put forward by union organizers at some Starbucks stores.”
Logan says that it seems Starbucks has been “taken by surprise by the rapid spread of the campaign,” and partly as a result has been faring poorly in NLRB elections. “In many cases, [the company] appears to have given up on winning hearts and minds,” he says, and it has taken an aggressive approach in its response to union organizing.
“It appears that Starbucks still does not fully understand the union drive,” Logan said.
Starbucks did not respond to Fortune’s request for comment.
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