Starbucks workers win store-by-store union vote as investors bail, seeing slower growth ahead

Starbucks workers, hoping to organize a union at three Buffalo, New York, cafes, scored a victory Thursday, even as the company faced pushback from investors over plans to raise wages next year.

On Thursday, the National Labor Relations Board sided with workers, who were looking to hold a vote to organize at three specific locations. Starbucks had been hoping to open voting to the entire Buffalo market in a single ballot. The decision means three separate unit elections will take place at the stores, with mail-in ballots due on Dec. 8, and a vote count on Dec. 9. More than 100 workers are eligible to vote.

If workers vote in favor of organizing, it will mark the first successful attempt at unionization for the coffee giant in the U.S. and could make waves in the industry.

Starbucks Workers United, the group organizing the vote, cheered the decision.

“Partners won. With this decision, the partners in Buffalo have the ability to win the very first union Starbucks store in the U.S.,” said Richard Bensinger, organizing director, in a statement to CNBC.

The NLRB decision came the same day Starbucks told investors that fiscal 2022 earnings would be lower than analysts were predicting. The company blamed both the ongoing impact of the Covid-19 pandemic as well as rising costs, which include wages.

On Wednesday, Starbucks announced it would be raising pay for workers based on market and tenure. By summer 2022, its pay floor will be $15 an hour, with an average hourly wage of $17 an hour, up from the current average of $14.

Starbucks shares tumbled more than 7% Friday as investors reacted to the slower profit growth ahead.

Restaurants have been raising wages in recent months, in an attempt to woo workers back to the industry. A labor shortage has reduced sales, as restaurants have had cut back on hours and scale back service. Meanwhile, workers are flexing their newfound clout, and there has been a pick up in labor union activity.

Bensigner said the pay bump is a positive for workers, but the movement is about more than money.

“I think they underestimate why people organize a union — not like people have a price in their head. It isn’t one issue or money. Simply if we have a real partnership, why don’t we have a union?” he said.

Starbucks is known for calling its employees “partners” and touting that it has among the most progressive benefits in the fast food and restaurant space. It has been encouraging workers not to vote to unionize over the last few months. Executives including Rossann Williams, executive vice president of North Americas, and Howard Schultz, its former CEO, went to Buffalo to hold listening sessions with workers in September.

In a statement Thursday, Starbucks said it was reviewing the NLRB ruling and evaluating its options.

“We remain focused on supporting our partners as well as maintaining open, transparent and direct conversations throughout the process,” the company said.

In an interview on CNBC’s “Squawk on the Street” Friday, Starbucks CEO Kevin Johnson said the company disagrees with the decision.

“We’re going to continue to do what we’ve always done, which is serve our partners,” he said. “We know that success is best when shared, and you know, certainly we’re going to stay focused on creating a great experience for them. And we’ll see how this unfolds. We don’t think it is in partners’ best interest to put a third party in between that relationship that we’ve always shared that is grounded in our mission, our values and the culture that that created this great company.”

Workers involved in the effort to unionize said working conditions at the Starbucks cafes worsened during the pandemic and they are looking for a more equitable partnership with the company.

Last month, the company sent a letter to Buffalo workers that said Starbucks was taking action to bring store operations back up to its standards, including bringing in help with staffing and repairing store issues quickly.

“Ask us anything – we’re all here to help,” said Allyson Peck, Starbucks regional vice president, Northeast region, in the note to the Buffalo employees. “You have the right to work directly with Starbucks – and if you don’t want to give up that right, you should vote’ no.”

The votes will be counted in December, and whatever the outcome may be, there’s likely going to be several years of activity that could include legal challenges or back and forth in the bargaining process, according to Michael Saltsman, managing director of the Employment Policies Institute. And taking this to scale could be challenging across both the company and the industry.

“I don’t necessarily think what is happening in Buffalo is indicative of a broader trend interest of organizing in the hospitality industry,” Saltsman said. “I think we’ve seen elsewhere that restaurant employees have not shown a lot of interest in the value proposition that unions are offering.”

He pointed to the Service Employees International Union’s push for higher wages, which has now been normalized, but has not led to more workers unionizing.

Casey Moore, a pro-union Starbucks Barista of five months, said she and workers feel confident they’ll have the first unionized store in Buffalo once the votes are counted.

“I’m not going to lie and say Starbucks’ [anti-union] campaign is having no impact … but momentum has only grown, and we are still very confident we will see the first unionized store in the U.S.,” Moore said.