On February 25, 2020, UNITE HERE, a New York City-based labor organization representing 300,000 workers in the United States and Canada, including 45,000 workers in the airport industry, released a 20-page report titled “One Job Should Be Enough: Inequality at Starbucks.”2 Based on the results of a survey of 309 Starbucks employees employed by its licensee HMSHost at 29 U.S. airports and an analysis of employee data for more than 2,000 employees, the report made several allegations. Key among them were charges of repeated “offensive and transphobic comments from managers” regarding lesbian, gay, bisexual, transgender, and queer/questioning (LGBTQ) baristas, and “harassment regarding their gender expression, and repeated misgendering” at airport Starbucks stores. It went on to say:

In the past year and a half, Starbucks has emphasized its renewed commitment to equity, inclusion and diversity. This report shows, however, that at Starbucks stores operated by HMSHost at airports across the country, Starbucks’ commitment to creating the “third place”—“public spaces where everyone feels like they belong”—is not being realized.3

The report was widely cited in the press. The New York Times and the U.K.-based The Guardian carried stories on it, as did a host of other publications and television news outlets. HMSHost pushed back on the allegations, saying, “We do not discriminate against any associate [employee] based on race, ethnicity, national original, LGBTQ status or any other reason.” The company also accused UNITE HERE of using isolated complaints to support its efforts to unionize several Starbucks airport locations. “The union has deployed a well-known tactic of using the media to frame its false narrative to negotiate these agreements,” a company representative said.4

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While Starbucks did not employ the workers at HMSHost, the signature green aprons they wore signaled to the world their association with Starbucks. Starbucks’ mission statement made no distinction between its employees and those of its licensees, so long as they served the company’s branded products. Now, Nzinga Shaw, Starbucks first-ever Global Chief Inclusion and Diversity Officer, and her team at Starbucks faced an urgent challenge: How, if at all, should they respond to the union’s accusations?

Starbucks Corporation: “A Different Kind of Company”
Starbucks Corporation (the company’s name was based on a character in the Herman Melville novel, Moby Dick) was founded in Seattle in 1971 by three friends from San Francisco. However, it was not until after a coffee equipment salesman named Howard Schulz bought the company from its original founders in 1987 that the company grew to become, by 2020, a global chain of 32,660 coffee and related products stores in 80 global markets. Of the total store count, 51 percent were company-owned stores, while the rest were operated by licensees. For fiscal 2020, Starbucks reported revenues of $25.3 billion and had 349,000 employees globally (and 228,000 in the United States). Eighty-one percent of Starbucks’ net revenue came from its own stores; 10 percent came from licensees; and the remaining 9 percent came from the sale of products, such as roasted coffee beans and single-service beverages.5

Ever since its inception, Starbucks had prided itself on being a different kind of company, one that not only provided superior products and service, but also one that brought a feeling of connection and belonging to customers and partners (i.e., employees) alike. This idea became known as “third place,” a welcoming place between work and home that provided a sense of community and opportunities for deep connection. The “third place” concept was central to the Starbucks mission, which was “To inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time.” Creating a “third place” was consistent with the company’s core values, which it described this way:

With our partners, our coffee and our customers at our core, we live these values:

• Creating a culture of warmth and belonging, where everyone is welcome.

• Acting with courage, challenging the status quo and finding new ways to grow our company and each other.

• Being present, connecting with transparency, dignity and respect.

• Delivering our very best in all we do, holding ourselves accountable for results.

Starbucks had a long history of demonstrating socially responsible practices toward its employees (whom it referred to as “partners”), including support for diversity and inclusion. Starbucks was the first privately owned U.S. company to include part-time employees in a stock option program; part-timers were also eligible for health insurance and 401(k) retirement benefits. In 2014, the company announced that employees who worked at least 20 hours a week would be eligible for 100 percent undergraduate tuition benefits through a partnership with Arizona State University. In 2018, the company announced that it had achieved pay equity for women and men and persons of all races doing similar work in its company-operated stores; the following year, it announced it had also achieved pay equity in Canada and China. (It had not yet achieved pay equity in several other markets, including Japan, Great Britain, and Italy.) Data published on its website showed that in 2020, representation of women and minorities exceeded national market availability benchmarks in every job category except those of store manager and manager.

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For many years, Starbucks had been a steadfast supporter of marriage equality. In 1988, Starbucks began offering full health benefits not only to full- and part-time employees and their spouses, but also to their domestic partners, a practice that was not widely adopted by other companies until more than a decade later.6 The company included sex-reassignment surgery in its health benefits package and had a process to update its digital records to reflect employees’ preferred names and pronouns.

The company had received numerous accolades, including being hailed as one of the “World’s Most Ethical Companies” by Ethisphere (2007–2018) and one of the “Most Admired Companies in America” by Fortune (2003–2019). Starbucks had also received a 100 percent rating on the Human Rights Campaign Foundation Corporate Equality Index (2015–2019).7

Although considered by many to be a progressive employer, Starbucks had a history of opposing the unionization of its employees. Long-time CEO Howard Schultz wrote in his memoir, Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time, “I was convinced that under my leadership, employees would come to realize that I would listen to their concerns. If they had faith in me and my motives, they wouldn’t need a union.”8 Despite the company’s resistance, unions had briefly made inroads at Starbucks. Workers at a coffee roasting facility had joined the United Food and Commercial Workers in the 1980s, and in the early 2000s some baristas in New York and other cities had supported the Starbucks Workers Union, an affiliate of the Industrial Workers of the World that advocated shopfloor organizing to win incremental gains. These organizing efforts had retreated or been defeated, however. In 2020, Starbucks stated in its annual report that “the number of Starbucks partners represented by a union is not significant.”

HMSHost
HMSHost, the company that operated more than 400 Starbucks stores in airports and travel plazas, was a global restaurateur specializing in food and beverage operations for travel venues. Based in Maryland, the company was owned by Autogrill S.p.A, an Italian concessionaire of travel stores.

HMSHost held a license from Starbucks. Licensing referred to a legal contract between two parties, the licensor (in this case, Starbucks) and the licensee (HMSHost). Typically, the licensor would grant the licensee “technology”—such as a brand name, recipe, or production process—owned by the licensor. In exchange, the licensee would agree to pay royalties and follow certain rules established by the licensor.9

HMSHost had signed its first licensing agreement with Starbucks in 1991, when it opened a Starbucks store at the Seattle-Tacoma International Airport. In 2003, HMSHost had extended its exclusive agreement with Starbucks for another 10 years; and then in 2011, it had renewed its contract two years early, agreeing to manage airport and highway locations for Starbucks until 2020. But in January 2020, HMSHost had ended its exclusive licensing agreement with Starbucks to enable it to introduce new coffee concepts in airports around the country. For example, at the Jacksonville, Florida, airport, HMSHost opened a store featuring coffee and food items from Southern Grounds, a local business. According to HMSHost spokesperson Shayna Iglesias, “HMSHost will continue to partner with page 501Starbucks in airports, but will no longer be limited to offering just the iconic brand.”10 In an interview, HMSHost CEO Steve Johnson stated of his company’s evolving relationship with Starbucks:

It was just a really good relationship for both sides. It’s still a good relationship. It’s just time to do something a little different. HMSHost is going to continue to be a partner, but they will be in a model where they are not exclusive, which gives us a range of options to better serve our customers.”11

During their long relationship with Starbucks, HMSHost had contributed to meeting some of Starbucks’ strategic goals. For example, HMSHost served as a corporate partner in the Starbucks 100K Opportunities Initiative, a coalition of employers and community partners committed to connecting youth to jobs, apprenticeships, and internships.12 By September 2016, HMSHost had participated in four job fairs and hired 3,550 youth, which helped Starbucks reach its stated goal of hiring 10,000 opportunity youth.13

Under U.S. law, licensees were normally considered to be independent contractors. As such, they were responsible for capital investments and operating costs, and they employed the individuals who staffed their stores. According to one legal expert, a licensee such as HMSHost typically had authority over employment decisions such as hiring, firing, and disciplining workers; training employees; and setting job qualifications and workplace rules. However, U.S. regulators had acknowledged that when the licensee used the licensor’s brand identity—as HMSHost did when it operated airport coffee shops under the Starbucks logo—the two organizations had what was sometimes called a “joint employer” relationship. This meant that the licensor could implement its brand standards, for example, by providing “opening day” training. The licensor also had the right to conduct reviews and inspections of licensee operations.14 In its annual report, Starbucks stated its understanding of its relationship with its licensee’s employees this way:

Employees working in licensed retail locations are required to follow our detailed store operating procedures and attend training classes similar to those given to employees in company-operated stores.15

The Incident at the Philadelphia Store
On April 12, 2018, Starbucks’ reputation was shaken by an incident that occurred at one of its Philadelphia stores. Two African American men, who had been sitting in the store waiting for a business meeting to start, asked an employee for a key to the restroom. The employee told them the restroom was only for customers, and since they had not purchased anything, they would not be allowed to use it. The employee then asked the two men to leave the store, but they refused. This caused an altercation, and the store employee called the police. Three police officers entered the store and asked the two men to leave, but once again they refused. page 502At this point, the police officers handcuffed the two men and took them to the police station on a charge of trespassing. They were released when Starbucks refused to press charges.16

Another customer at the store videorecorded the incident and posted it to Twitter, setting off a firestorm of controversy on social media. The next day, the Philadelphia chapter of Black Lives Matter held a demonstration outside the Starbucks store. A spokesperson for the organization said:

Black and brown people deserve to have a safe space without being profiled. Shoutout to the white allies who stood up and saw injustice and fought against it challenging the police. That’s what this is about.17

Celebrities and politicians also spoke out, accusing the company of racial profiling.

Right after the incident, Starbucks put out a short statement that did not indicate specifically what had happened at the store. When criticized, the company issued a longer statement later in the day. Starbucks’ CEO Kevin Johnson characterized the incident as “despicable” and described steps the company would take to “ensure a greater sense of community:”

…. I am writing this evening to convey three things: First, to once again express our deepest apologies to the two men who were arrested with a goal of doing whatever we can to make things right. Second, to let you know of our plans to investigate the pertinent facts and make any necessary changes to our practices that would help prevent such an occurrence from ever happening again. And third, to reassure you that Starbucks stands firmly against discrimination or racial profiling.18

After indicating he would call for a company-wide training session, Johnson ended his statement with a note of apology:

Finally, to our partners who proudly wear the green apron and to customers who come to us for a sense of community every day: You can and should expect more from us. We will learn from this and be better.19

On May 19, Starbucks announced that anyone who walked into one of their stores, whether they bought anything or not, was a customer.20 In a separate context, the company’s founder and chairman, Howard Schulz said, “We don’t want to become a public bathroom. But we’re going to make the right decision 100 percent of the time and give people the key.21

Anti-Bias Training
On May 29, a few weeks later, Starbucks closed more than 8,000 stores for a full day, forgoing $16.7 million in sales, to train 175,000 employees on racial bias.22 An additional 7,000 licensed Starbucks stores in hotels, airports, college campuses, and grocery stores were page 503given the option to remain open or to close and participate in the training.23 HMSHost stores did not participate.

During the four-hour training sessions, partners were guided through multiple interactive modules that consisted of team- and partner-based discussions, as well as individual reflection and commitment-building activities. Each module included audio-visual content that featured guest talks from, among others, members of Starbucks’ senior leadership team, including Howard Schultz (chairman and founder), Kevin Johnson (chief executive officer), Roz Brewer (chief operating officer), and Rossann Williams (executive vice president). Together, these leaders underscored the words of the company’s team guidebook, that “everyone who wears the green apron, to do everything you can individually and collectively to lift up the love and humanity in our stores and treat everyone the way you would want to be treated.”24

After establishing ground rules and revisiting Starbucks’ mission, the training engaged participants in reflection on what “belonging” felt like. Participants were reminded that the third place was not a physical location; rather, it was a feeling, an emotion, and an aspiration not only for Starbucks’ stores and neighborhoods but for the country.25 As the training progressed, participants explored individual and structural biases, the historical context of racial discrimination in America, and how partners could respond to challenging situations in their stores. While the primary focus was racial bias, the training also explored other challenging situations, such as interacting with customers who had a thick foreign accent26 and confusion about customers’ gender identities.27

The training session also provided an opportunity for the senior leadership to unveil their new policy that all visitors to Starbucks, whether they made a purchase or not, were to be considered customers. Participants also learned that the new policy set behavioral expectations for customers. Rossann Williams, Executive Vice President, explained:

So, when a person is using a Starbucks space, we will respectfully request that customers experience our stores in a manner that maintains a warm and welcoming environment by:
• Acting legally and ethically
• Communicating respectfully
• Being considerate of others
• Using the space as intended

This is going to require true leadership…28

The Covington Reports
In addition to holding the day-long anti-bias training, Starbucks engaged former U.S. Attorney General Eric Holder Jr. and Covington & Burlington, LLP, an international law firm, to assess Starbucks’ policies, procedures, and initiatives with respect to civil rights, equity, diversity, and inclusion. The resulting assessment report (Covington Report 1), released page 504on January 23, 2019, was complimentary in many respects, including praising the senior leadership team’s commitment to creating “public spaces where everyone feels like they belong.”29 But the report also identified additional ways Starbucks could strengthen its commitment to civil rights and equal treatment. These included incorporating anti-bias training in the employee on-boarding process; revising company policies on discrimination, harassment, and retaliation; and expanding harassment-prevention training. The report also recommended that the company hire a senior executive with responsibility for diversity and inclusion.

At the request of Starbucks’ leadership, Eric Holder and the Covington team undertook a follow-up study in late 2019. They released an updated Covington Report on February 24, 2020 (Covington Report 2).30 In it, Holder offered this appraisal of the company’s stance toward diversity and inclusion:

Following a months-long evaluation, … I concluded that the Company’s commitment to minimizing the effects of implicit bias in its stores and among its workforce was genuine, and that Starbucks had taken a number of steps to promote equity, diversity, and inclusion in its stores and in the communities it serves. It was clear to me that Starbucks’ efforts to promote civil rights were much more than window dressing…. It is important to acknowledge something about Starbucks that has been clear to me from the work I’ve done: Starbucks is committed to critical self-assessment.”

Exhibit A summarizes the recommendations of the first Covington report and the company’s progress toward meeting them, as identified in the follow-up report.

The Union’s Charges
Just one day after the second Covington Report came out, UNITE HERE released its report on discrimination at Starbucks’ airport stores.

UNITE HERE’s 300,000 or so members in the United States and Canada worked mostly in the hotel, food service, laundry, warehouse, and gaming industries. At the time it issued its report, the union represented around 4,000 Starbucks workers at licensees such as HMSHost (2,750 employees), Compass, Sodexo, Aramark, Hilton, and MGM. It was also engaged in active organizing drives with HMSHost employees at airports in Orlando, Florida; Denver, Colorado; and Washington DC.

The data for the UNITE HERE’s report, “One Job Should Be Enough: Inequality at Starbucks,” came from multiple sources. These included a survey of 309 HMSHost Starbucks employees (about 12 percent of all HMSHost Starbucks employees), employee data on 2,067 workers at HMSHost Starbucks stores provided by HMSHost, interviews with both union and non-union employees, and public information about Starbucks’ policies. Of the 2,067 employees whose data was analyzed, 79 percent were women, and 85 percent were people of color. The average age of the focal group was 30, and their average pay was $13.12 an hour.

The union study made several allegations regarding racial and gender discrimination. One was racial inequity in pay. The report indicated that in 2019, the median wage of Black page 505baristas was $11.15, compared with $12.67 for Hispanic/Latino baristas and more than $13 for white baristas. Forty-eight percent of the respondents in the UNITE HERE survey who said they were denied a promotion indicated that they were African Americans. Seven percent of the respondents also noted other instances of racial bias. For example, a Starbucks barista in Portland reported:

Working with [name redacted] makes me uncomfortable. He has gotten uncomfortably close to me and has made racist remarks. He was chanting ‘build the wall’ and ‘Make America Great Again’ to me.

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An Orlando-based barista said:

I have witnessed supervisors […] repeatedly use the n-word in casual conversation when referring to other people. The other supervisors and assistant managers that use the n-word never say it in front of the manager who is Haitian-American, but they feel comfortable saying it in front of associates and baristas without fearing repercussions, regardless of race.

The report also indicated that, contrary to Starbucks’ claims that its stores were a safe space for the LGBTQ community, the analysis identified several cases of misgendering, offensive comments, transphobia, and harassment. A Denver-based barista reported:

As a trans nonbinary type-1 diabetic I face a lot of issues with the company. My bosses don’t respect my pronouns (they/them), and our healthcare package is really not accessible for my kind of income. I expect HMSHost to do better for Starbucks workers and they just haven’t been.

Another respondent, who was fired by the company, was more specific in her charges:

Within the first two years of working at HMSHost I was misgendered and discriminated against and it reached a point where enough is enough, it was when one of my managers ridiculed me in front of the passengers and coworkers by shouting out “sir, he’ll be right with you!” and pointing at me. She was laughing and smiling assuming that it was funny, but that moment was the most embarrassing moment of my life. At that moment I was embarrassed and insecure about me being a transgender woman…. So I stood up for myself because I’m not going to let someone tell me I’m not valid as a human being.

Finally, the report indicated that one in four immigrant workers who were surveyed stated that they had been told by their managers to stop speaking their preferred language at work. The report included a memo distributed by HMSHost to its employees at Washington D.C.’s Reagan International Airport that mandated English as the language while at work. An Ethiopian-born barista spoke about how this policy affected her:

Our company has a broad rule that you’re only allowed to speak English at work. Sometimes when our managers are not present, me and my coworkers don’t follow that rule because I have coworkers who don’t speak English fluently so I need to talk to them in our native language to get the work done. When Starbucks corporate inspectors come to our store, the managers made sure we did not speak Amharic, our native language. This makes me feel disrespected since the majority of my coworkers are immigrants.

Shaw’s Challenge
In response to a recommendation made in the first Covington report, in November 2019 Starbucks had hired Nzinga Shaw, then head of diversity for the Atlanta Hawks National Basketball Association team, as its first Global Chief Inclusion and Diversity Officer. She had worked with the Covington team during their follow-up assessment.

Now, just three months into her job as Starbucks’ Global Chief Inclusion and Diversity Officer, Nzinga Shaw faced an urgent challenge: how should she and her team respond to the charges made in UNITE HERE report and the publicity they had generated? Although HMSHost, not Starbucks, employed the airport employees, the union’s allegations posed a serious threat to Starbuck’s reputation. Starbucks’ ability to influence the behavior of its page 507licensee was limited in some ways. Yet, members of the public were unlikely to distinguish between green apron-wearing baristas at the airport and ones at their local Starbucks. The company had clearly stated in its Standards of Business Conduct that “conducting business ethically, with integrity and transparency, is essential to preserving our culture and protecting our brand.” Not only were the board of directors, officers, and employees of Starbucks required to abide by the Standards, but so were all others working on the company’s behalf, including licensees.31 Now, as one of her first assignments on her new job, Shaw and her team had to determine how to respond to UNITE HERE’s charges of discrimination in public spaces.

Discussion Questions

1) There are several kinds of employment discrimination prohibited by equal employment opportunity laws. Which kinds of employment discrimination did UNITE HERE allege had occurred at Starbucks’ airport stores?

2) What steps had Starbucks taken to promote equity, diversity, and inclusion in its own work culture? What more do you think Starbucks should do, if anything?

3) Should Starbucks be concerned about the treatment of workers by its licensees, such as HMSHost? Why or why not?

4) What factors should Nzinga Shaw consider, when deciding what to do with respect to UNITE HERE’s charges of discrimination at Starbucks airport stores?

5) What would you recommend Nzinga Shaw do, and why?