Starbucks Store Closings Spark Dispute With Unionizing Employees

Starbucks  (SBUX) – Get Starbucks Corporation Report interim Chief Executive Howard Schultz is looking to the future. 

In a July 11 letter to employees Schultz laid out a new vision and principles to reinvent the future of the giant coffeehouse chain.

“And to be successful,” he said, “it will take our collective courage to begin again.”

One key aspect of that new vision: Starbucks will be heading into the future with fewer locations — and a surging effort by its employees to unionize.

‘A High Volume of Challenging Incidents’

The retail giant said it was planning to close 16 stores due to safety concerns. 

A company spokesperson said that “after careful consideration, we are closing some stores in locations that have experienced a high volume of challenging incidents that make it unsafe to continue to operate.” 

The list includes some locations in Portland, Los Angeles, Philadelphia, Washington, and the company’s hometown of Seattle. 

Asked about details, a company spokesperson said no single incident was behind the closings. But rather they were driven by a combination of factors, including homelessness, substance abuse and the mental-health crisis.

Debbie Stroud and Denise Nelson, senior vice presidents of U.S. operations at Starbucks, said in a letter to employees that creating a safe, welcoming and kind third place — the place between work and home — “is our top priority.”

“Because simply put, we cannot serve as partners if we don’t first feel safe at work,” the letter said.

Part of the plan includes “modifying operations, closing a restroom, or even a store permanently if safety in their place is no longer possible” and employees will be moved to neighboring stores.

‘Virulent Union-Busting Campaign’

But Starbucks’s future also includes what has become a national effort by its staff to unionize its stores, which Schultz has strongly opposed. Some 9,000 of its stores are in the U.S., out of 34,000 worldwide.

The Starbucks Workers United union blasted the company’s move, saying that of the 16 stores slated to be closed, two in Seattle had successfully unionized while a store in Portland has filed for a union election.

The first store to vote to unionize was in Buffalo, N.Y., in December. Three months later, the company and staff at its Buffalo stores were tied up in a scheduling dispute.

Earlier this week a report from WBFO-FM and NPR said that the company and the National Labor Relations board appeared before an administrative law judge in Buffalo. The NLRB has charged the company with more than 200 labor-law violations at 21 locations in the city, the report says.

Overall, more than 230 Starbucks stores are in the process of unionizing and 50 have voted to join the national Workers United union. Last month, the company closed a store in Ithaca, N.Y., where employees had voted to unionize.

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“Every decision Starbucks makes must be viewed through the lens of the company’s unprecedented and virulent union-busting campaign,” the union said in a statement.

“Starbucks claims that they are closing the stores because they are ‘unsafe, yet the closing of the popular college-town store in Ithaca, N.Y., followed a strike over unsafe conditions.”

Starbucks’ response was not to fix the problem, the statement continued, “but to punish the workers who had recently unionized.”

“After being charged by the federal National Labor Relations Board with hundreds of law violations including firings, threats, and store closings,” the union said, “the company’s leaders, Howard Schultz and [Board Chair] Mellody Hobson, apparently believe they are above the law.” 

A ‘Troubling Trend’ of Crime Against Retail

Crime is a concern among businesses and there has been plenty of graphic footage of rampant shoplifting and employees being attacked.

A New York Times study found that from 2018 to 2020, assaults reported to the FBI by law-enforcement agencies overall rose 42%; they increased 63% in grocery stores and 75% in convenience stores.

Of the more than two million assaults reported to the FBI by law enforcement agencies across the country in 2020, the Times said, more than 82,000 — about 4% — were at shopping malls, convenience stores and other similar locations.

A survey by the National Retail Federation last year found that 82% of loss-prevention professionals said mall or store violence/shooting incidents has become more of a priority over the past five years.

“It has been my experience that retailers are in the business to be profitable,” said Karl Langhorst, adjunct professor at the University of Cincinnati College of Criminal Justice. “If they are closing stores, be they union or nonunion, it is usually because keeping the store open is no longer viable because of profitability headwinds.” 

Langhorst said rising violent crime in retail establishments has had an increasingly negative impact on employee hiring and retention, customer traffic, and the ability for retailers to maintain acceptable store standards. 

“The perceived lack of consequences by criminal offenders for their actions, coupled with significant law enforcement staffing shortages, has created what unfortunately is an increasingly difficult and dangerous situation,” he said. 

“This troubling trend is not only negatively impacting retailers and their employees and customers, but also the communities they serve.”

‘A Carefully Crafted Story?’

In its 2021 annual report, Starbucks said that “if a significant portion of our employees were to become unionized, our labor costs could increase and our business could be negatively affected by other requirements and expectations that could increase our costs, change our employee culture, decrease our flexibility and disrupt our business.”

Vivek Astvansh, professor of marketing and data science, and research director at the Center for Education and Research in Retail at Indiana University, said Starbucks “wisely admitted that its ‘responses to any union organization efforts could negatively impact how [its] brand is perceived.’”

“Little did the company know that even its seemingly pro-employee actions may be framed as retaliation for unionization,” he said. “Or are we witnessing a carefully crafted story?”

Astvansh said that as of June 24, nearly 1.39% of Starbucks employees were unionized, compared with 4.6% of retail workers and 1.3% of food-service employees in the U.S. who are unionized.

“But remember that the unionization in Starbucks began on Dec. 9, 2021,” he said. “This rapid growth should concern not only Schultz and his colleagues but also executives in other companies.”

He said that when Starbucks announced pay hikes and benefits — perks that it is not compelled to offer to unionized employees — it was a move to dissuade employees from unionizing. 

“The cynic in me thinks its plausible that the recent closures may serve the same purpose,” Astvansh said. “Only Schultz and other executives would know the truth.”

“But should one see a pattern in Starbucks’s messages,” he added, “one would be inclined to believe that the retaliatory motive overrules the responsibility one. Watch out for Starbucks’s SEC filing in November this year.”

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