A Storied Union Takes On Starbucks

The Industrial Workers of the World is taking on the coffee giant and its much-praised workplace practices

by Moira Herbst

Daniel Gross looks a lot like your average Starbucks (SBUX) barista. The 28-year-old is slim and clean-shaven, dressed in tan cargo pants and a T-shirt.

But Gross would rather talk about worker solidarity than lattes and soy milk these days. A volunteer organizer for the Industrial Workers of the World (IWW), Gross claims his involvement with the union got him fired from a New York City Starbucks a year ago. Now he's preparing to go before a judge on Aug. 6 to make the case for himself and other baristas he says have been fired or intimidated for union activity. Seated in the one-room headquarters of the IWW's local in Queens (N.Y.), Gross says it's all part of a broader battle to change the way American companies treat their employees.

"This trial is putting corporate social responsibility itself on trial," says Gross. "Starbucks has been the paragon of socially responsible marketing, and if it's fake at Starbucks, it's very likely fake in general."

NLRB Gets Involved

Gross and the IWW contend that Starbucks not only discourages union activity, it also overstates the generosity of its benefits. Among other things, Gross points out that only 42% of Starbucks "partners," or employees, are covered by the company's health insurance, a figure the company confirms. That's below the 47% at Wal-Mart Stores (WMT), which has come under heavy fire for its pay and benefits (see BusinessWeek.com, 11/16/06, "Can Barack Wake Up Wal-Mart?").

Starbucks, which doesn't recognize the IWW in its stores, takes great exception to the charges. The company points out that it has worked hard over the years to treat its employees well, earning a reputation as one of the country's best employers. Tara Darrow, a company spokesperson, says that many of its employees have health insurance coverage through other means, say from a spouse or a parent. Overall, 91% have health insurance coverage of some sort, she says. The company also offers health-care coverage to employees who work as little as 20 hours a week, one of the few to do so. And Starbucks offers affordable insurance, including a routine care health plan for $5.45 a week.

While the IWW continues waging a battle to win public opinion, its also working on the legal front. And the union has some independent support for its union-busting charges. After investigating the IWW's charges, the National Labor Relations Board (NLRB) found merit in claims the company fired three pro-union employees, gave others unfair negative performance reviews, and unfairly banned workers from wearing multiple union pins. The NLRB's regional office will hold further hearings on the issues Aug. 6. Darrow says that, "Starbucks believes the allegations are baseless, and will defend ourselves vigorously against them."

The NLRB hearing is set to begin just after Starbucks announced third quarter earnings, on Aug. 1. Revenues for the period increased 20%, to $2.36 billion, while net income rose 9% to $158.3 million. The results were a pleasant surprise for investors and Wall Street analysts. They have been watching the company's margins and store traffic closely, to try to figure out whether the growth opportunities ahead are as strong as they have been in the past. They also would like an early indication of whether the company's recent prices are likely to crimp consumer demand for its coffee.

Unconventional Union

Gross is a lead organizer for an IWW Starbucks campaign that began in 2004. But the IWW has a storied history that stretches back to its founding in 1905. The "Wobblies," as they were known, included prominent labor leaders such as Eugene Debs, Mary Harris "Mother" Jones, and William "Big Bill" Haywood. They sought to bring all workers into "One Big Union" and ultimately abolish the wage system, which they considered slavery. At its height in 1923, the IWW had 100,000 members.