'Hands are tied': Starbucks benefits and wages take center stage in union fight

New benefits for non-union Starbucks (SBUX) employees is upping the stakes between the coffee giant and union organizers who recently visited the White House, with potential legal implications.

When interim CEO Howard Schultz recently rolled out a $1 billion investment in employees that included perks such as wage increases and new store equipment, he made it clear that the benefits would only be available to employees at nonunion stores.

"We must reintroduce joy in the customer and emotional connection back into the partner experience," Schultz said Starbucks’ Q2 2022 earnings call. "We do not have the same freedom to make these improvements at locations that have a union or where union organizing is underway."

Starbucks Workers United, the union representing the baristas nationwide, alleged that Schultz's comments would have an immediate "chilling effect" on organizing campaigns and impending votes nationwide.

Starbucks workers have been organizing at stores at a rapid speed: More than 250 of nearly 9,000 company-operated locations have taken steps toward unionization in recent months, according to a tracker by the Law360, and a flurry of union election filings are added daily. (The tracker estimates that 43 stores have voted against unionization while 10 votes voted against unionization)

The timing is notable: Once workers vote to unionize and the tally becomes certified, the employer would technically have to freeze the current levels of benefits and wages in what is called the "status quo period."

"I couldn't give a $3 pay raise without bargaining it with the union first — that would be unlawful to do that because the union now is... the exclusive bargaining agent for all of those bargaining unit members," Joseph McConnell, an attorney specializing in labor and employment law as a partner at the Morgan, Brown & Joy, told Yahoo Finance. "The employer's hands are tied on anything having to do with wages, hours, and working conditions for those bargaining unit members."

At the same time, the National Labor Relations Act (NLRA) prohibits employers from promising benefits to employees on the condition that they reject a union.

Marion Crain, a law professor at Washington University, told Yahoo Finance that Starbucks seems to be making the "good side" of their argument about benefits, "not the side that the workers need to hear from the union, which is [the company] can take them away unilaterally, just like you can give them unilaterally if you don't have a union."

In a letter from Starbucks Workers United's counsel to the National Labor Relations Board (NLRB), an independent federal agency tasked with enforcing U.S. labor law, the union claimed that Schultz's comments are in violation by "threatening to withhold newly-devised benefits from employees who decide to unionize."

The letter further asserted that "Starbucks has always been able to pay its partners much more and to provide more generous benefits, but it wasn't until the workers started this movement to unionize that the company is finally offering some improvements."

'Starbucks will continue bargaining in good faith as required by federal law'

Since returning to the Seattle-based coffee giant in April as interim CEO, Schultz has sought to create a new employee experience at Starbucks as the company combat's the growing unionization push.

“Federal law prohibits us from promising new wages and benefits at stores involved in union organizing," Schultz said during the earnings call. "And by law, we cannot implement unilateral changes at stores that have a union."

The company expects to give at least 5% increases to employees with two-to-five years of experience and at least 7% raises to employees with five years experience. The company is also planning additional changes such as the ability for more customers to tip workers when they're not paying with cash.

These benefits include "student loan refinancing, additional skills recognition programs, enhanced in-app tipping and new profit-sharing initiatives," Schultz said on the call, adding that eligible employees will also have the opportunity to increase sick time, implement a new "financial stability toolkit benefit," and access credit card tips.

"Starbucks is permitted by law to offer these benefits to workers at unionized stores," Starbucks Workers Union argued in their letter. "Our bargaining committees will demand that these modest improvements be given immediately to all the partners." '

Starbucks defended Schultz's comments.

"We have a responsibility to inform our partners of their compensation and benefits and the federal laws related to such benefits during unionization," Starbucks spokesman Reggie Borges said in a statement to Yahoo Finance. "We fully disagree with the mischaracterizations, baseless accusations and the falsehoods presented and are concerned with the impact such statements may have on our partners who disagree with the Workers United Organizers."

Borges added that at locations "where workers have union representation, Starbucks will continue bargaining in good faith as required by federal law."

On Friday, Labor Secretary Marty Walsh told Yahoo Finance Live (video above) that three-time Starbucks CEO Howard Schultz should invest "in all of his workforce," not just the stores without unions.

“I don't think he can just invest in the people, the dozen shops that organize. That just doesn't seem like a good business model," Walsh said. "I commend him for investing in their salaries, and I also would recommend that the stores that organize to sit down and have a conversation with them.”

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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