Starbucks: A baristas union?

By BusinessWeek

In a spare, officelike courtroom in midtown Manhattan, former Starbucks (SBUX, news, msgs) barista and Bronx native Joe Agins Jr. sits on the witness stand with eyes wide open.

Dressed in an oversize T-shirt and sporting a goatee, he looks younger than his 24 years. Several times, he asks the judge for time to calm his nerves and gain his composure. Agins is describing a day in 2006 -- after he'd become an outspoken member of the Industrial Workers of the World (IWW) union -- when he was introduced to the company's New York metro regional vice president, who asked him if he liked working at Starbucks.

"I felt closed in and trapped by management, and like I was under pressure," Agins says.

Agins was fired from a Manhattan Starbucks in December 2005, after working there for a year and a half. His statement is part of testimony at a National Labor Relations Board (NLRB) hearing in which Starbucks is accused by the U.S. government of violating labor law 32 times in an effort to prevent unionization at some of its stores.

The trial pits a group of young baristas against one of the best-known and fastest-growing corporations in the world. It also offers a window into the state of labor relations in the 21st century.

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Unions are in retreat around the country. Manufacturing, their traditional stronghold, has seen jobs move steadily overseas. In services companies, including Starbucks, unions have rarely taken hold. Wal-Mart Stores (WMT, news, msgs) and many other major players have gone to great lengths to avoid unionization drives. Unions represent just 5% of workers in the retail industry and 8.1% of the private-sector work force.

Starbucks has a markedly better reputation for employee relations than Wal-Mart does. But that is precisely why the IWW is taking on the coffee chain: Agins and other workers say Starbucks' employee-friendly image is wholly undeserved.

The chain, they say, has a systemic problem with low wages, irregular work hours and a lack of reliable health care. One statistic the union points to is that only 42% of Starbucks workers use its health-care plan –- an even-lower figure than the rate at Wal-Mart.

Starbucks maintains that it offers competitive wages and is among the first large employers to offer health insurance to part-time employees, who make up 100% of its work force.

"This trial is putting corporate social responsibility itself on trial," says Daniel Gross, another former barista involved in the NLRB case. "If it's fake at Starbucks, it's very likely fake in general."

Fired for legal reasons?

This particular part of the battle is about unionizing. For this hearing, which began July 9, the IWW's Starbucks Workers Union claims Starbucks has engaged in systematic and illegal suppression of union activity, an assertion the company denies.

The government called several Starbucks officials for questioning earlier this month. More recently, it began questioning baristas. The NLRB attorneys are trying to show that Agins, Gross and one other worker were fired in retaliation for union activity.

The defense, represented by law firm Akin Gump Strauss Hauer & Feld, maintains that Agins and Gross were fired for perfectly legal reasons, such as disrupting business in its stores (Agins) and threatening a manager (Gross).

In an ostensibly sober scene, there are some amusing contrasts. In one corner, sharply dressed attorneys from the global law firm representing Starbucks are sipping the company's Ethos water and a variety of Starbucks coffee concoctions. Behind them are seated an internal company attorney and New York metro regional vice president, also dressed in suits and frequently pecking at their BlackBerrys.

In the other corner, less sharply dressed government lawyers sit alongside lead union organizer Gross, all with generic coffee cups that look like they're from a corner deli. A succession of casually dressed 20-something baristas rotate into the courtroom one by one to testify, often receiving a pat on the back by a broadly smiling Gross, now a graduate of Fordham University School of Law.

Gross, who has spearheaded the campaign at Starbucks and worked to escalate it since its start in 2004, testified Aug. 15 and 16. In his testimony, he discussed his performance reviews, in which he experienced a gradual fall from grace as a star barista when he started in 2003 to the time of his firing in 2006. In his first review, his manager wrote that he "has a true knack" for treating customers with a "customers come first" attitude, and in a later review Gross recalls successfully reciting the "four essentials" for a manager (water, grind, proportion, freshness).

But by a review dated Aug. 5, 2006, the day he was fired, his manager wrote that he "failed to create a positive work experience for his fellow partners." The day he was fired, Gross told managers that "the workers united will never be defeated," he said in a near monotone on the witness stand.

Radicals strategically taking aim

While the government tries to show that Gross and others were unfairly fired or intimidated for union action, Starbucks attorneys paint a different picture. They are trying to show that Gross and his fellow baristas are a group of radicals strategically taking aim at the company, which they argue has not stood in the way of their union efforts.

"Starbucks is a multibillion-dollar corporation. So I guess that must mean we're bad," said Starbucks attorney Daniel Nash in his opening statement July 9. "I know that the IWW, apparently in their zeal against capitalism or corporations, they don't like that. They don't like any big companies."

In other words, Gross and his IWW colleagues are trying only to interfere with business at Starbucks. "This is a campaign that almost from the beginning . . . has tried to do everything possible to disrupt the operations of Starbucks to harm the company," added Nash in the opening statement.

Starbucks reached a settlement with the NLRB after a similar set of allegations were brought in March 2006. The settlement did not acknowledge guilt but resulted in the reinstatement of two employees and the payment of $2,000 in damages.

While the IWW works to keep Starbucks' corporate-communications department busy, higher on the company's list of concerns now may be the rising price of milk, some of which it's passing on to its customers. The fear is that in part due to price increases, stores will see reduced traffic.

Still, Starbucks' reckoning with the IWW continues. This particular case is expected to conclude in September. But even then it's unlikely Starbucks has seen the last of the union baristas.

This article was reported and written by Moira Herbst for BusinessWeek.