Hospitality Industry Legal Alert: Second Circuit Rejects Board's ULP Determinations against Starbucks

Date   May 15, 2012

On May 10, 2012, the United States Court of Appeals for the Second Circuit rejected a National Labor Relations Board (NLRB) decision and reinforced employers' rights on three fronts.


Executive Summary:  On May 10, 2012, the United States Court of Appeals for the Second Circuit rejected a National Labor Relations Board (NLRB) decision and reinforced employers' rights on three fronts: (1) companies may, under the right circumstances, restrict employees to displaying their pro-union sentiment with a "one button pin" limit; (2) Atlantic Steel's four-factor test for analyzing employee outbursts is inapplicable when the employee's obscenities are made in the presence of customers; and (3) when an employee is placed on notice regarding his performance deficiencies and fails to correct them, the employer is entitled to conclude that his limited skills do not insulate him from discharge.  NLRB v. Starbucks Corp., 2012 U.S. App. LEXIS 9537 (2nd Cir. 2012). 


In August 2010, the Board found that Starbucks committed various unfair labor practices, including the following, which the company appealed to the Second Circuit:

  1. That a Starbucks policy prohibiting employees from wearing more than one pro-union button on work clothes was an unfair labor practice;
  2. That Starbucks unlawfully used protected activity (making profane outbursts in front of customers during a store protest) to justify the discharge of pro-union employee Joseph Agins; and
  3. That Starbucks' decision to discharge pro-union employee Daniel Gross was primarily motivated by anti-union animus.

The Second Circuit rejected the Board's findings on two of these issues, holding that Starbucks did not commit an unfair labor practice by enforcing its one button pin policy or discharging Gross. The Court remanded the issue of Agins' discharge for further consideration by the Board in light of the Court's determination that the Atlantic Steel test was inapplicable.

The One Button Policy

As to the first finding, Starbucks presented evidence that it – like many hospitality employers – required employees to wear multiple company-issued buttons carrying information and advertising about its products. Starbucks also asserted that allowing employees to wear an unlimited number of union-issued buttons would turn employees into "personal message boards" and "seriously erode" the information conveyed by Starbucks-issued pins.

The Second Circuit agreed, pointing out that although employees have a right to wear union insignia at work, when the insignia unreasonably interferes with the employer's public image, a restriction may be justified. As a result, Starbucks met its burden of establishing that the one button restriction was a necessary and appropriate means of protecting its legitimate interest in controlling the business-related messages contained on employee buttons.

Applicability of Atlantic Steel Narrowed

In order to protest Starbucks' "one button" rule, Agins entered his worksite wearing union t-shirts, caps, and insignia, including pro-union buttons and pins.  Agins engaged in an altercation with another (off-duty) Starbucks employee and loudly used profanity in front of customers.

The Second Circuit pointed out that even when an employee is engaged in protected activity, he may lose NLRA Section 7 protection by virtue of profane and insubordinate comments. To determine whether employees have lost Section 7 protection, the Board considers four factors, commonly known as the "Atlantic Steel" test: (1) the place of the discussion; (2) the subject matter of the discussion; (3) the nature of the employee's outburst; and (4) whether the outburst was provoked by an employer's unfair labor practice.

The Second Circuit decided that the Atlantic Steel test was inapplicable in this case because the test's first factor – the place of the discussion – does not contemplate obscenities in a public place in the presence of customers. As a result, the Second Circuit remanded the issue of Agins' discharge and invited the Board to consider what standard should apply when otherwise potentially protected obscenities are used in the presence of customers.

Dual Motivation Analysis

To analyze an "unlawful motivation" termination case, courts require the NLRB's General Counsel to show that protected conduct was a motivating factor in the employer's termination decision. The burden then shifts to the employer to show, as an affirmative defense, that the discharge would have occurred in any event and for valid reasons.    

The Second Circuit agreed with the Board that the General Counsel established its prima facie case that Gross's termination was substantially motivated by his union activity. The Court decided, however, that the Board ignored strong evidence that Starbucks would have fired Gross regardless of his union activity. Starbucks had placed Gross on notice that his hours of availability were too low, he did not communicate effectively with management, and he lacked knowledge regarding the company's current promotions. The Court held that these documented performance deficiencies provided a sufficient and independent reason to terminate Gross. 

Employers' Bottom Line:

  1. If a company can show that limited and selective uniform restrictions are a reasonable and necessary way to protect its public image, it can limit the display of pro-union apparel or insignia;
  2. Atlantic Steel's four factor test for analyzing employee outbursts does not apply to areas frequented by customers – stay tuned for the Board's opinion on what standard it contends applies; and
  3. Documenting a company's legitimate reasons for disciplining or terminating an employee will pay dividends when defending claims that the employee was fired for union activity. 

If you have any questions regarding this Alert or other employment related issues impacting employers in the hospitality industry, please contact the authors, Keith Warren, or Carolyn Lam,, any member of Ford & Harrison Hospitality Industry practice group, or the Ford & Harrison attorney with whom you usually work.