Coffee giant Starbucks announced pay raises and improved benefits for its employees, except for those working at stores that voted to form a union. Cheddar News speaks with George Conboy, Chairman of Brighton Securities who explains how companies work to fight unions. 

Closing Bell

Why Unionized Starbucks Workers Are Excluded From Recent Pay Hikes 

Welcome back to closing bell on cheddar news. Starbucks baristas at a small shop in Buffalo new york kick started a national labor movement when they voted to unionize in december of last year. Since then, about 200 Starbucks stores have followed suit out of roughly 9000 locations across the country, but now it seems the company is punishing them by excluding unionized stores from company wide pay raises and benefit expansions. Despite labor organizers asking the coffee giant to include these stores in the benefits, expansions, pay raises that nonunionized Starbucks stores went into effect this week joining me now to talk about it as George convoy, chairman of Brighton Securities George, welcome to the show. Starbucks says that labor laws prevent it from unilaterally granting benefits to unionized locations and they need to go through a bargaining process while union says that they can absolutely agree to do it. So are you surprised by the tactics that Starbucks is using right now? Not at all. Starbucks has about 5% of their, excuse me, 2% of their stores unionized at this point and with rising costs hitting their recent quarter, they certainly don't want to have to deal with the union and the added costs and friction on additional stores. So they're going to play hardball with the union and say, okay, you don't join the union will give you more pay, we'll give you more benefits. Do you think this is a union busting move from Starbucks? Uh, certainly not necessarily busting move, but it would be a move to stymie the union and limit their gains in future stores. After all, it's a hardball tactic. Most large companies don't want to deal with unions if they don't have to. And if they can keep unions out by paying a little more and giving a little more in the way of benefits, Starbucks is going to go to the map with this union store by store, and CNBC is reporting that they obtained a letter from Lynn Fox, that is the president of Workers United to Starbucks, Ceo, Howard Schultz, here's what it says. Workers United refuses to stand by while Starbucks cynically promises new benefits only to non unionized workers and withhold them from our members. There is a quote right there on your screen. What can the union do to make sure Starbucks employees at unionized locations get the same benefits as their colleagues at these non unionized shops George. Well, traditional union tactics will be negotiating with management and ultimately, if they don't get what they want, they could hold a strike and closed down certain Starbucks locations if they can't get the kind of pay and benefits they want, ironically, unionization at a small number, relatively small number of Starbucks stores has really achieved higher pay for most Starbucks workers. But at this point, the company can increase benefits and pay a little less than they might for unionized stores and still keep the union out since employees are smart and they know that they'll have to pay union dues and they aren't going to net every dollar that the company increases if they belong to the union. So it's hardball tactic on both sides, unions play rough. Big companies play rough remains to be seen how well this is going to work on either side. And as you well know, George, Starbucks isn't alone here many employees that a lot of companies form unions in the past year. But do you think that momentum is now fading? Well it is as wages are going up after all? We've had big demand for workers and companies have had a hard time filling their ranks. So we've seen even companies who aren't unionized raising pay and raising benefits simply to attract more workers. That's the way any economic system works with supply and demand. So you can expect to see more of this. We've certainly seen plenty. Do you think other companies that saw recent union drives? I'm talking about amazon Apple. Do you think they'll make similar moves here? Absolutely. Yeah. And I think that that they're watching Starbucks to see how successful this move will be after all, if you have to pony up more to pay your employees. And by so doing can keep someone else from helping run part of the expense side of your P. And L. You're likely to do that. And these other large companies amazon and alike will watch very carefully If Starbucks is successful in keeping unions out of the remaining 98% of their stores, you'll see more moves like this. Well, let's talk about that. What other tactics do you think we can expect from Starbucks here? Well, the, the things that typically people want to join unions for our more pay more benefits and better working conditions in the Starbucks situation, it's mostly pay and benefits. I haven't read anything that suggests the working conditions are are unusual in their industry. But other industries, we read things about how things are in the working conditions are in amazon warehouses and you may see people striking for not more pay and benefits simply, but also for better working conditions. You can bet that if there's a threat of higher costs, amazon will respond and improve those working conditions. That's how economies work more broadly speaking. What does unionization mean to company's bottom line George? Well, it increases their costs. That has been a big concern for Starbucks because their recent earnings report note that they have much higher costs. And in a business like Starbucks, it differs from, say amazon a bit. If you don't buy that thing from amazon today, you might buy it tomorrow or next month. But if you don't buy a cup of coffee today, you're not going to buy two or three cups tomorrow to make up for what you didn't get today. So every lost sale is a sale lost forever. In most cases, Starbucks won't want to lose those sales and they are willing to pay more in compensation and benefits to keep those stores open. But every company has a limit beyond which they won't go if the union pushes them too far. Starbucks is likely to push back pretty hard. Really great insight there. George, convoy, chairman of Brighton Security. Thanks for your time George. I appreciate it.