Starbucks’ Grinding Labor By Doug Nielson

“Starbucks is a lot like working for Disney. Disneyland may be Œthe greatest place on earth’ to visit, but I was in [IOUE] local 501 in Los Angeles, and Disneyland wasn’t the greatest place on earth to work.” ‹Jeff Alexander, five-year veteran of Starbucks’ roasting plant in Kent, WA

Back in 1999 when Howard Schultz, Starbucks CEO, heard that the maintenance workers in one of his two US roasting plants were likely to vote in a union, he drove the 15 miles from corporate headquarters to Kent, Washington for a private meeting with the 22 workers. He didn’t offer to remedy any of the workers’ complaints, but he did give reassurances of his blue collar roots and offered stories from his book, Pour Your Heart Into It. Apparently Howard’s father broke his leg while working as a diaper truck driver and since he didn’t have any health insurance (with the presumably nonunion diaper company), Howard’s family suffered.

Howard reiterated as he has done many times before that because of his early experiences with poverty, even his part-time workers would always have health insurance. He didn’t offer to reverse the recently instituted health benefit cuts or remedy the company’s arbitrary and unfair wage and promotion practices. Most importantly he didn’t address the workers demand for a fixed benefit retirement plan.

Jeff Alexander remembers looking out the window after the talk and wondering what percentage of Howard’s $14 million salary he had spent on the brand new Jaguar parked near his own aging Suburban.

The way Schultz arrived at the decision to begin providing health benefits to part-time employees in May 1991 is instructive of Starbucks overall business strategy. Schultz realized that with recruitment and training costs running at $3,000 for each new employee‹Starbucks gives new employees 24 hours of training in the fine points of coffee beans, brewing and customer service‹he could save a lot of money by paying half that amount per employee for healthcare insurance. Two-thirds of his work force were part-time workers. The result of this policy was as Thompson and Strickland point out in their book, Strategic Management: “Whereas most national retailers and fast-food chains had turnover rates for store employees ranging from 150 to 400 percent a year, the turnover rates for Starbucks’ baristas ran about 65 percent.”

Starbucks gained a lot of praise for offering healthcare benefits to workers working more that 20 hours a week, including even an invitation to the Clinton White House in April 1994. Health Insurance for part-timers is so rare in this country that it merits a commendation for “business ethics” from a US president. The health insurance policy had the additional benefit of allowing Starbucks to recruit a more educated class of barista. Without the largely minority and immigrant employees of, say, a McDonalds, Shultz was able to maintain the upscale white middle class ambiance he preferred for his gourmet coffee stores.

After the International Union of Operating Engineers (IUOE) won the union recognition vote on Nov. 14, 1999, Starbucks launched a vigorous anti-union campaign. Surveillance cameras were installed in the lunchroom and at the entrances to the plant. Union supporters have been suspended without pay for such petty offenses as swearing. They have had unsubstantiated safety complaints filed against them and have been denied promotions. Maintenance workers who quit have not been replaced, so that the original 22 are now down to 18.

Don Goodson’s case provides a good example of the current atmosphere in the plant. He was hired 5 months ago on the recommendation of a worker who had been persuaded to file for a union decertification vote. Management focused their attention on Don as the key person needed to vote the union out. But Don’s mind was made up in favor of the union after management told him the union was proposing a retirement plan. “Workers need a pension plan. Right now we’re just gambling on the stock market to take care of us in our old age. That’s not a risk I’d like to take,” he reasoned. After the decertification failed, Starbucks charged Don with making derogatory remarks to another worker; despite witness accounts to the contrary, he was moved to the graveyard shift.

Waiting for a contract After voting in the union nearly two years ago and going through many negotiation sessions, the maintenance workers at the Kent roasting facility are still waiting for a comprehensive contract offer from Starbucks. Starbucks has offered to give a retirement benefit in exchange for a wage freeze, no improvement in health benefit costs, revoking the Bean Stock, revoking the Stock Incentive Plan (SIP) and other miscellaneous small perks, but has refused to put a dollar figure on the exchange.

The union is also asking for a standardized wage scale, and promotion practices based on experience and demonstrable skills. Right now, for example, wages in the department range from $15 to $24/hour, with new hires often brought in near the top of the wage scale because of a current high market demand for their skills. People who have been with the company for years and are highly skilled and knowledgeable about the plant are often denied opportunities for advancement. Each worker is forced to negotiate individually with a constant stream of new supervisors and managers‹who seem like mere trainees for higher corporate positions in Starbucks’ rapidly expanding empire.

The company reported on July 26 that it is on track to open 1,200 new stores in fiscal year 2001, with 825 in the United States and 375 abroad. Revenue climbed 20% in the third quarter compared to last year’s third quarter results and is expected to climb an additional 25% in the 2002 fiscal year.

After five years of working at Starbucks, Jeff Alexander is looking forward to being able to cash out his first installment of “bean stock” (this is Starbucks’ term for stock in the company that employees receive every year equivalent to 14% of their salary). He may get $5,000 but would prefer to have money in a retirement fund. It is not widely known that employees don’t actually get to own this bean stock. They are only allowed to hold it for a minimum of five years. At the time of redemption, they are allowed to keep any difference between the original price and the current price.

It could be argued that this benefit actually costs Starbucks nothing since the workers will only get a benefit if the stock price goes up. If the price stays even or goes down they will not receive a dime. This is an even more risky plan for saving than the common 401K retirement plans. The union would normally expect a $2.50/hour employer contribution to their pension fund but are willing to settle for $0.50/hr from Starbucks just to get an initial contract.

Many of the employees, particularly the 180 in the packaging and distribution departments who earn from $9 to $11 an hour, are forced to redeem as much Bean Stock as they can every year just to meet their family’s basic necessities. For those who can afford it, Starbucks also offers the SIP, which allows employees to purchase Starbucks stock at a 15% discount if they hold on to it for at least two years.

Union town The IUOE members are proud of one small victory achieved in the process of trying to negotiate a union contract. What sparked the current union drive in the first place was a cut in healthcare benefits. Consequently, early in the negotiations, management suggested they might be willing to increase the company’s share of the health insurance premiums from 75% to 90%. In the end this improvement was granted to the entire plant with the exception of unionized workers.

The attempt by Starbucks to torpedo support for the union among the technicians and mechanics in the maintenance department actually backfired and instead raised support for the union among the 180 low skilled workers in the packaging and distribution departments. These are primarily minority workers including immigrants from at least 7 different nations. Many had been paying up to $160 a month for health insurance for their families.

Seattle has traditionally been a union town and before Howard Schultz and his group of investors bought out Starbucks back in 1987, the United Food and Commercial Workers (UFCW) union had organized it. Schultz managed to get his coffee bars decertified within 4 months of taking over, but it took another 5 years to de-unionize the roasting and warehouse facilities.

After breaking the UFCW barista’s local, Schultz began to see the wisdom of one of their key demands: healthcare benefits for part-time workers. As Jan Pelroy, IUOE local 286 business manager explains, “Schultz is a type of person who goes through life having epiphanies.” The union is hoping to induce a new epiphany in Howard, or simply modify an old one. Not only should Howard’s father have had health care insurance but he also should have had a pension. It may be hard for Howard to understand this but not everyone can depend on a rich son like himself to support them in their old age.

This time around, the maintenance workers are up against a powerful multinational corporation with deep pockets, the best lawyers money can buy, and a local media that prefers to write stories about such things as Howard’s recent fulfillment of a boyish fantasy with his purchase of the Seattle Supersonics basketball team (no word yet on Howard’s attitude toward the NBA basketball players union).

Jeff sums up management’s strategy, as one of “stall and persecute.” “If they can get rid of us by decertification, then the story they will tell is not that they squashed the union but that the workers didn’t want a union. The Œpartners’ [Starbucks’ term for their employees] didn’t feel the need.” Howard Schultz is fond of referring to Starbucks as “a company with a soul.” Considering its union-busting history, Jeff sees it as the soul of “a dog that’s killed chickens. Once they’ve killed, it’s hard to stop them from doing it again.”

The stakes are high for the 18 workers involved in this battle. They have received considerable outside support from sources such as Jobs With Justice, Global Exchange, the Washington State Labor Council, the King County Labor Council, the Organic Consumers Association (who are fighting Starbucks’ use of Bovine Growth Hormone in their milk), and the Canadian Auto Workers (who have organized 12 Starbucks outlets in British Columbia). They have even received support from the Australian Public Finance Workers Union who demonstrated against Starbucks at the Australian Olympics.

Starbucks and its shady business practices are spreading like a cancer across the globe. There may not be much we can do about that‹but our movement which was born here in Seattle can make sure the wherever Starbucks goes, unions will follow with a different kind of globalization in mind‹a globalization of resistance and dignity. If Kent’s workers win, we all win.