Labor & Employment Law Daily Wrap Up, LABOR—UNFAIR LABOR PRACTICES—3d Cir.: Appeals court rejects broadly compensatory ‘Thryv’ remedy for unlawfully discharged Starbucks baristas, (Jan 2, 2025)

By Jason Albright, J.D.

The two union organizers were fired for alleged performance issues and company policy violations.

Although substantial evidence supported the NLRB’s finding that Starbucks Corp. unlawfully fired two baristas who previously engaged in union organizing, and unlawfully reduced the hours of one of them, the Board exceeded its authority in requiring Starbucks to compensate the two for direct or foreseeable pecuniary harms under Thryv, Inc., the Third Circuit held. The appeals court found that, although it lacked jurisdiction in the case to consider Starbucks’ constitutional challenge to the Board’s layered ALJ removal protections, the NLRA limits the Board’s remedial authority to equitable—not legal—relief, and Thryv purported to authorize broad compensatory damages (NLRB v. Starbucks Corp., Nos. 23-1953 and 23-2241 (3d Cir. Dec. 27, 2024)).

Organizing baristas. Between 2018 and 2020, the two employees worked as baristas at Starbucks locations in Philadelphia. In 2019, they began to work at the store located at Broad and Washington Streets. Around June 2019, the two began to talk with coworkers regarding problems with the store’s manager at the time, as well as complaints about their working conditions.

In-store demonstration. In July, the two baristas coordinated an in-store demonstration, in which they and other current or former employees entered the store to deliver a demand letter to the manager. After the demonstration, the two continued to air their concerns, attend meetings with Starbucks executives and employees, and engage in other union organizing activities. Emails exchanged between managers expressed concern with the situation and the growing demands of the employees.

Warning. In September 2019, Starbucks hired a new store manager, and on October 29, one of the organizers received a written warning from him and the district manager. It stemmed from the new manager’s observation that the barista slammed a drink down in front of a customer and failed to call out the customer’s name properly, after which the manager had to apologize to the customer. The warning also stated that management needed to coach the barista multiple times to connect appropriately with customers and not to slam drinks on the counter.

Reduction in schedule. The district manager sent an HR partner an email stating that the two organizers were complaining to other employees about the new manager. He noted the October 29 warning to the first organizer as well as a written warning to the second for tardiness.

The district manager’s email also summarized a reduction in scheduled hours at the Starbucks location. In November, the first organizer talked to the new manager bout the reduction, and the new manager explained it was in response to the organizer’s poor workplace performance and “causing a disruption.” During that conversation, the new manager specifically referred to the October 29 written warning.

Second written warning. On November 21, the district manager, new store manager, and a second HR partner issued the second organizer a second written warning. It stated that he failed to wear his hat and apron on multiple occasions, left the front counter multiple times during his shift, and failed to stock the pastry case on multiple occasions.

ULP charge and store demonstration. The Philadelphia Baristas United union filed an unfair-labor-practice charge against Starbucks on November 25, and the two organizers led other workers and supporters into the Starbucks store to hand the district manager a copy. They later filed their own charges in 2020.

They “think they can do what ever they want.” In January 2020, the new manager sent the district manager an email that said, in part, that the two organizers “think they can do what ever they want & just threaten to call NLRB if anybody says anything to them[.] I’m more than willing to deal with the backlash that would come with terminating the two of them because it doesn’t matter if we terminate now or 1 year from now[;] they will still call NLRB & spew vicious lies just like they do now while we pay them & give them benefits[.] [T]hese two people obviously hate the brand and do everything they can to tarnish the name STARBUCKS.”

Termination of first organizer. Later in January, the district manager and store manager notified the first organizer of her termination. In a written notice, they explained that she had allegedly treated customers in a hostile manner earlier that month. First, another barista had accused her of responding poorly to a customer’s request for a particular amount of ice, including by asking the customer if she would like to make her drink herself.

“Now you want free butter?” A second incident had involved a customer asking for free tea bags as part of a promotional campaign. The customer had purchased a holiday mug that came with free tea for the month of January. When the organizer took the mug, the customer said he had coffee in the mug already and wanted the tea bags on their own. The organizer replied that the promotion required using the mug, though her shift supervisor told her to do what the customer asked. As the organizer was doing so, the customer also asked for free butter, though he had not ordered food.

She retorted, “Now you want free butter?” The organizer later acknowledged that the statement was not good customer service.

Termination of second organizer. The first organizer told the second organizer in early February about a rumor that another barista at the store would be terminated. The second organizer, in turn, shared the rumor with the other barista, who later confronted the supposed source of the rumor, telling her what he had heard from the second organizer. The supposed source then told the store and district managers about the conversation. Also informed was the Regional Director of Operations, who concluded that knowingly spreading this false rumor, as he said the second organizer had done, warranted termination.

That followed on February 26, and according to his notice of separation, the second organizer was fired for “[k]nowingly communicating false information” to the barista, which was “disruptive to operations.” It also referred to the second organizer’s prior discipline for “disrupting operations” and coworkers.

Board’s consolidated complaint. In August 2020, the Board issued a consolidated complaint against Starbucks for alleged violations of Sections 8(a)(1) and (3). Most relevant to the appeal, the Board alleged that Starbucks unlawfully reduced the first organizer’s hours, and the fired both her and the second organizer in response to protected labor organizing activities.

ALJ’s findings and remedy. In June 2021, an ALJ who heard the case concluded that these actions indeed violated the NLRA. He ordered Starbucks to offer reinstatement to the two organizers and to make them whole for any loss of earnings and benefits. He also ordered Starbucks to compensate them for search-for-work and interim employment expenses and to make the first organizer whole for her unlawful reduction in hours.

Board’s decision. Starbucks filed exceptions to the ALJ’s decision, and a three-member panel of the Board heard the case. It adopted the ALJ’s findings and conclusions in February 2023. In addition to the remedies ordered by the ALJ, the Board ordered Starbucks to compensate the two organizers for any “direct or foreseeable pecuniary harms incurred as a result of the unlawful adverse actions against them, including reasonable search-for-work and interim employment expenses, if any.”

The Board sought enforcement of its order, and Starbucks cross-petitioned for review.

Constitutionality of ALJ’s removal protections. The Third Circuit first rejected Starbucks’ argument that the Board’s ALJs are unconstitutionally insulated from presidential oversight. The appeal court lacked jurisdiction to consider the claim under 29 U.S.C. § 160(e) because Starbucks failed to raise it before the Board, and no extraordinary circumstances excused its failure. And even if the appeals court had such jurisdiction under the NLRA, it observed, Starbucks failed to establish standing to bring the claim because it did not demonstrate an injury-in-fact from the removal protections at issue.

Second organizer’s termination. Next, the appeals court found that substantial evidence supported the conclusion that the second organizer would not have been discharged in the absence of his protected activities. Starbucks argued that the ALJ failed to consider all the evidence of the second organizer’s allegedly disruptive behavior, but the ALJ did consider a majority of the examples Starbucks raised, and the notice of the second organizer’s termination was primarily based on his spreading of the rumor, which was a protected activity.

First organizer’s termination. Substantial evidence also supported the conclusion that Starbucks failed to establish that it would have discharged the first organizer in the absence of her protected activities. Starbucks argued that the ALJ ignored evidence that she repeatedly violated a company policy prohibiting types of “serious misconduct” that may provide grounds for “immediate separation from employment,” including “abusive behavior toward partners, customers or vendors,” but the ALJ did examine the events Starbucks argued he ignored. The ALJ also persuasively explained, according to the Third Circuit, that other baristas who were fired or issued final warnings for their demeanor toward customers had behaved much worse than the second organizer, including “yelling and swearing at the store manager,” “acting in a threatening manner,” and “arguing with a disabled customer.”

Reduced hours. Finally, the appeals court found that substantial evidence supported the Board’s finding that the first organizer’s protected activity was a motivating factor in Starbucks’ decision to reduce her hours. The store manager told her he reduced her hours in response to her workplace performance, referencing her October 29, 2019 warning, which the ALJ had concluded—without challenge on appeal—was itself unlawful. That statement, in combination with the uncontested conclusion that the warning was an unfair labor practice, presented substantial evidence that the reduction in hours was a response to protected organizing activities, the Third Circuit found.

“After-acquired evidence” and recording. Starbucks argued in the alternative that, even if the two organizers’ terminations violated the NLRA, the Board should not award them reinstatement and should limit backpay because Starbucks would have fired them anyway based on after-acquired evidence that they were recording their coworkers—and, inadvertently, customers—without their consent in violation of company policy and Pennsylvania law. Here, the court observed that substantial evidence supports the conclusion that Starbucks was, in fact, aware of the recording activity before it fired them, meaning the evidence was not “after-acquired” at all. Because Starbucks took no adverse action against them at the time, even though the conduct would have warranted termination under company policy, it failed to meet its burden to show that it was unaware, when the terminations occurred, of this purportedly after-acquired evidence.

Thryv remedy. Finally, however, the Third Circuit found that the Board’s Thryv remedy in the case exceeded its authority under the NLRA. In Thryv, Inc., 372 N.L.R.B. No. 22 (Dec. 13, 2022), the Board determined that, “in all cases in which [its] standard remedy would include an order for make-whole relief,” it will also “expressly order that the respondent compensate affected employees for all direct or foreseeable pecuniary harms suffered as a result of the respondent’s unfair labor practice” (emphasis in original). Here, though Starbucks forfeited its nondelegation and due process arguments against imposition of the remedy, the appeals court nonetheless found it unauthorized under the NLRA.

Section 10(c) of the NLRA, the Third Circuit observed, authorizes the Board to order employers to “cease and desist from” unfair labor practices and to “take such affirmative action[,] including reinstatement of employees with or without back pay, as will effectuate the policies of [the NLRA].” 29 U.S.C. § 160(c). The NLRA thus limits the Board’s remedial authority to equitable, not legal, relief, but the remedy here, as in Thryv, purported to grant broad compensatory relief.

The Board’s Thryv remedy thus exceeded its authority under the NLRA, according to the Third Circuit. Vacating that portion of the order and remanding for further proceedings, the appeals court advised that “[w]hile the Board can certainly award some monetary relief to the employees, that relief cannot exceed what the employer unlawfully withheld.”

The case is Nos. 23-1953 and 23-2241.

Judge: Ambro, T.

Attorneys: Ruth E. Burdick for the NLRB. Maurice Baskin (Littler Mendelson) for Starbucks Corp. d/b/a Starbucks Coffee Co.

Companies: Starbucks Corp.; Starbucks Coffee Co.

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