Starbucks, NLRB Square Up Once Again Over Make-Whole Remedies

Starbucks Corp. is taking aim again in federal court this week to undo one of the first National Labor Relations Board orders ever levied against the company.

The coffee giant will urge the US Court of Appeals for the Sixth Circuit to vacate a 2023 NLRB ruling that ordered it to rehire a Michigan union organizer and compensate her for damages incurred from her unlawful firing during oral arguments Thursday. The NLRB is seeking enforcement of that order.

The case provides another opportunity for big businesses to target the board’s 2022 Thryv Inc. doctrine, which allows the agency to order monetary compensation for “all direct or foreseeable pecuniary harms” stemming from employers’ unlawful behavior, legal observers said.

Last month, Starbucks urged the Third Circuit to toss another NLRB ruling over its expanded remedies. Michael Duff, a labor law professor at Saint Louis University, said employers would likely continue to challenge the doctrine because it strikes at the “foundation” of the nation’s labor laws.

Section 10(c) of the National Labor Relations Act calls for backpay and reinstatement as primary remedies, and the US Supreme Court established in the 1940 Republic Steel Corp. v. NLRB ruling that the labor board cannot seek punitive damages for unfair labor practices.

“If you touch that, you are really changing what a lot of people who are concerned about liability consider the essence of labor law,” Duff said. “If employers lose this, they would certainly petition the Supreme Court.”

Organizer’s Firing

In its 2023 Starbucks ruling, the NLRB held that the company illegally fired Workers United organizer Hannah Whitbeck after she helped start a unionization campaign at several cafes in Michigan.

Whitbeck was terminated in April 2022 after she left her shift with only one other co-worker on staff. Starbucks said this was in violation of its “two-partner policy,” but the NLRB found they discriminated against Whitbeck because of her union activities. The board ordered it to rehire Whitbeck and issued “make-whole” remedies to cover expenses such as medical costs, late payments on credit cards or loans, or any other monetary damages that arose from her firing.

Whitbeck’s firing was also the subject of the first injunction the agency obtained from a federal judge since the beginning of the Workers United campaign in December 2021. A Michigan district judge issued a nationwide cease and desist order against Starbucks before limiting it to just the one cafe.

Legal or Equitable

Starbucks argued in its briefs to the Sixth Circuit that the board’s order should be vacated because it lacks authority under the NLRA to issue compensatory remedies.

It cited legal doctrine rebuffing a court’s ability to issue legal remedies and to other statutes, such as the Labor Management Relations Act and the Migrant and Seasonal Agricultural Worker Protection Act, where Congress gave courts the ability to order that type of compensation.

“When Congress wants to authorize compensatory damages, Congress says so directly and ensures that a court—not an agency—decides the case,” Starbucks said.

Duff said he thinks the NLRB will have a hard time upholding Thryv in federal appeals courts because of the standards set in Republic Steel.

“I’ve always thought it was a fight worth having, because I think it’s an incredibly cramped view of what remedies should be available under labor law,” he said. “It’s hard to exaggerate the extent to which employers are able to engage in unfair labor practices virtually cost-free.”

Both Sides Digging In

The labor board said in its briefs that the remedies mentioned in the Thryv decision have been upheld separately by federal appeals courts in the past. It cited examples of measures ordering compensation of transportation, housing, retirement fund contributions, damaged belongings, and health costs.

“Such make-whole relief is necessary to undo the consequences of the unlawful conduct, restore the status quo ante, and dissipate the coercive impact on employees,” the agency said, adding that Starbucks’ arguments “reflect a fundamental misunderstanding of the board’s remedial authority.”

David Pryzbylski, a management-side attorney for Barnes & Thornburg LLP said he sees viable arguments to both sides of the debate but the issue likely won’t be resolved unless Republicans gain a majority at the NLRB, or Thryv is struck down by SCOTUS.

“Whether it be Starbucks or anybody else, this is something we’re going to continue to see go up to the Court of Appeals,” he said. “This is a high priority for the general counsel. My gut tells me it’s here to stay and employers need to plan accordingly.”

Starbucks is represented by attorneys from Williams & Connolly LLP and Littler Mendelson PC. The NLRB is represented by board attorneys. Starbucks Workers United is represented by David Lichtman with Dowd, Bloch, Bennett, Cervone, Auerbach & Yokich.

The case is NLRB v. Starbucks Corp., 6th Cir., No. 23-01767, Oral arguments scheduled for 10/31/24.