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Starbucks will have at least one unionized cafe in Buffalo, New York — a first for the chain

After a months long battle, Starbucks workers in Buffalo, New York supported efforts to unionize at least one local cafe.

The result marks the first successful attempt at unionizing the coffee giant’s U.S. company-owned locations since it went public nearly three decades ago and could send ripples through the restaurant industry.

Workers at the Elmwood Avenue location voted 19 to eight in favor of unionizing under Workers United New York, a branch of the Service Employees International Union.

A second cafe, the Camp Road location, voted against a union, with eight workers in favor and 12 opposing. One ballot was declared void, while two more were challenged by Starbucks or the union. The union also claimed that several submitted ballots were missing. The National Labor Relations Board is still counting votes for one other Buffalo cafe.

A third cafe, on Genesee Street, will not find out the results of their election Thursday because of challenged ballots. Fifteen workers at the store voted to unionize, with nine against. Seven ballots are facing challenges, the majority of which came from the union over the eligibility of those voters.

Shares of the company fell less than 1% in afternoon trading on the news.

A rare restaurant union

MKM Partners analyst Brett Levy wrote in a note to clients Thursday that he doesn’t think today’s decision will have an immediate impact on Starbucks’ strategy or financial results. However, Levy said that a more widespread push across Starbucks’ footprint for union representation could lead to another pay hike for workers down the road. Additionally, if employees at other restaurant chains follow their lead, Levy wrote that Starbucks is one of the companies that is better positioned to absorb higher costs.

Unions are rare in the restaurant industry. Only 1.2% of workers at food and drinking outlets were members of unions in 2020, below the private-sector unionization rate of 6.3%, according to the Bureau of Labor Statistics. But a tight labor market has been encouraging increased efforts to organize. This year has seen union drives by Amazon workers and strikes by John Deere’s and Kellogg’s employees. But the efforts have not always yielded victories for the labor unions.

Sen. Bernie Sanders, I-Vt., congratulated Starbucks Workers United for its victory on Twitter and wrote that Starbucks should stop “pouring money into the fight against the union and negotiate a fair contract now.”

After Thursday’s vote count, the ballots will need to certified by the NLRB’s regional director, which could take up to a week. For the Genesee Street’s results, the regional director will have to examine any objections or challenges, which may require a hearing to resolve. The union may also object to the results for the Camp Road cafe because of the ballots it said were submitted but missing from the count.

Stores that voted against a union can petition for another election in a year.

The next hurdle is negotiating a contract with Starbucks. Labor laws don’t require that the employer and union reach a collective bargaining agreement. On top of that, workers who lose faith in the union can petition to decertify after a year, putting a ticking clock on negotiations.

The NLRB had twice sided with Starbucks Workers United, first allowing the stores to vote as single units instead of opening up the vote to all 20 stores in the region as Starbucks had wanted, a move that typically favors the employer. As a result, 81 workers were eligible to vote instead of 450 across the city.

Then, the NLRB this week allowed the vote count to move ahead for Thursday afternoon. Ballots were mailed in with a deadline of Wednesday evening and the count was streamed via Zoom. The union fight attracted attention from lawmakers including Sen. Chuck Schumer, D-N.Y. and Rep. Alexandria Ocasio-Cortez, D-N.Y., who expressed support for workers seeking to organize.

Wages, staffing shortages at issue

The union effort at Starbucks has faced strong opposition from management. The company sent top executives and former CEO Howard Schultz to the Buffalo locations, a move that Starbucks Workers United called “union busting.” In November, workers filed a federal labor charge, accusing Starbucks of illegal activity like engaging in a campaign of threats, intimidation and surveillance in response to the union push. The company has denied the allegations.

“I certainly apologize if anybody thought that was intimidation. It’s actually what I’ve been doing for 17 years, so whether it was something special to a partner or a situation, I can’t speak on every situation,” said Rossann Williams, Starbucks’ North American president. “What I can speak on is our partners asked us for help and we showed up, and they were absolutely right. They let them down, and we apologized for that.”

The coffee chain is known for calling its employees “partners” and touting among the most progressive benefits in the fast food and restaurant space. But wages and working conditions were two of the sticking points for pro-union workers, who said the pandemic exacerbated staffing shortages and pressured employees.

Last quarter, 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.

In late October, 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 stock is down 2.5% over the last three months but up less than 6% over the past month.

More battles ahead

Thursday’s results hardly mark the end of the fight for Starbucks, as three additional stores in Buffalo are seeking to vote on unionizing, as is one location in Mesa, Arizona. Starbucks CEO Kevin Johnson acknowledged to CNBC’s Jim Cramer this week that more stores are likely to organize, but for the other 9,000 locations across the U.S., it will be operations as usual.

“I expect there may be a handful of other stores, but I really believe when I talk to over 7,500 of our store managers just in the last two days and there’s strong support for the heritage and history of Starbucks in the fact that we’re a partner-centric company. And I believe our green apron partners everywhere are going to stand up, and if they’re given a voice, we’re going to put our partners first,” Johnson said on CNBC’s “Mad Money with Jim Cramer” Tuesday.

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