Starbucks Corporation (NASDAQ:SBUX) has agreed to a $38 million settlement with New York City over allegations of violating the city’s labor laws.
Major Penalty For Fair Workweek Breach
On Monday, New York City Mayor Eric Adams announced the settlement, which stems from a probe by the NYC Department of Consumer and Worker Protection into Starbucks’ alleged violation of the city’s Fair Workweek Law over 500,000 times since 2021. This is the biggest worker-protection settlement in the city's history.
Starbucks has agreed to pay $35 million to more than 15,000 New York City baristas who reported erratic schedules and unexplained cuts in work hours. The company will also provide about $3.4 million in civil penalties to the city.
Mayor Adams emphasized, “It doesn’t matter how big your business is — if you violate our workers’ rights, you will pay the price.”
Starbucks, in response, stated, “This compensation is about compliance, not unpaid wages,” adding, “We support the intent of the law and remain committed to compliance, but its complexity creates real-world challenges.”
Zohran Mamdani, Bernie Sanders Extend Support
On Monday, Mayor-elect Zohran Mamdani and Senator Bernie Sanders (I-Vt.), both strong advocates for labor unions, joined Starbucks employees in their strike for better wages and working conditions.
Sanders earlier slammed the company for prioritizing executive pay over its nearly 12,000 union workers by granting CEO Brian Niccol a large compensation package while failing to reach a labor agreement.
Meanwhile, earlier in November, Mamdani pledged to boycott Starbucks during the strike, urging others to join him in sending a unified message: "No contract, no coffee."
Recovery Amid Challenges
This settlement arrives at a crucial time for Starbucks, as the company navigates a complex turnaround. TD Cowen analyst Andrew M. Charles has pointed out that the company’s recovery is not as straightforward as it may seem, with labor spending and margin dynamics posing significant challenges.
Despite these challenges, Starbucks has seen a notable uptick in its growth metric from 33.02 in early November to 79.63 currently, indicating a growing divergence between its improving financial prospects and its public sentiment. The White House's new trade deals with Argentina, Guatemala, El Salvador, and Ecuador could lower tariffs on imports like coffee and bananas. For Starbucks, reduced tariffs on coffee beans would lower costs and strengthen its earnings outlook.
Benzinga Edge Stock Rankings shows that Starbucks had a stronger price trend over the short and medium term but a weaker trend over the long term; the details of other metrics are available here.
Price Action: Starbucks stock plunged 7.88% on a year-to-date basis, per Benzinga Pro. On Monday, it fell 2.53% to close at $84.91.
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