Portside

On February 27, after over two years of gutsy and strategic organizing, Starbucks Workers United forced Starbucks to surrender to its workers’ wishes and recognize their legal right to a union under the National Labor Relations Act (NLRA). The baristas’ union and the company have agreed to a national framework for contract bargaining and for recognizing the wishes of workers at non-union stores to join the union. Earlier that month, after twelve years of similarly courageous fighting, workers in another union campaign against chain restaurants, Fight for $15, celebrated a different kind of victory: the creation of a tripartite Fast Food Council—bringing together workers, industry, and government—that will regulate wages in the fast food industry in California. The sector-wide minimum wage of $20 per hour went into effect on April 1.

While Starbucks workers still have a long way to go to win a good contract and organize thousands of remaining non-union stores, they have already achieved what in recent decades has been nearly impossible: unionizing a large national corporation from scratch under federal labor law. It seems that for employees of corporations like Starbucks, the NLRA still functions, barely, if the conditions are just right.

By contrast, the Fast Food Council was created entirely outside of federal labor law. In the years leading up to the council’s creation, the SEIU-led Fight for $15 won major gains for fast food workers. It transformed public policy around the minimum wage and secured massive legislative wage gains for millions of workers, and it is now setting up an entire wage-regulation apparatus, including worker representation, in the state of California. Yet all this was achieved without winning an NLRB-certified union election or bargaining a contract at a single fast-food restaurant.

Why were Starbucks workers able to unionize under federal labor law, while those at Dunkin’ Donuts were not? One key reason is that, unlike Dunkin’ Donuts or most other fast-food chains, Starbucks is vertically integrated, meaning the parent brand owner also directly owns and operates the restaurants. This gives the union a single corporate entity to target for organizing, to pressure for demands, and to hold accountable in the eyes of the public and the law. Of course, U.S. labor protections being what they are, Starbucks workers still had to rely on tactics outside the formal machinery of the National Labor Relations Board (NLRB) to bring Starbucks to the table. These included campaigning for board seats and working with college students to get Starbucks off campuses. Yet for all that, the result will still be a union contract between one union and one employer, bargained under the auspices of the NLRB.

Meanwhile, most of the chain restaurants targeted by Fight for $15 are franchised. This allows Dunkin’ Donuts to insist that its workers are actually employed not by the corporation itself, but by the thousands of independent franchisees who own and operate its restaurants—and therefore Dunkin’ has no duty to recognize or bargain with any union. Corporate franchisers like Dunkin’ minutely control every aspect of the franchisees’ business to make them all look and feel the same, and they siphon off a generous share of the franchisee profits that unions would target to fund wage increases. This separation of legal employment status from economic power and control throws up all but insurmountable barriers to workers trying to unionize their franchised chains under federal labor law.

The NLRB has twice attempted to stop corporations from evading labor law through contracting arrangements by holding franchisers accountable as “joint employers” along with franchisees, with a duty to bargain with unions and liability for unfair labor practices. However, the first such effort was abandoned by the Trump administration, while the second was overturnedby a federal judge in Texas. Save for a few integrated chains like Starbucks, fast-food workers have so far been left largely outside the protections of labor law.

Denied the effective right to bargain with fast-food corporations, Fight for $15 has operated in an environment much like the Wild West faced by workers prior to the passage of the NLRA in 1935. Accordingly, Fight for $15 in California has resurrected a model of organizing from that pre-NLRA era.

Enacted in 1935, the NLRA permanently legalized unions for the first time and created the NLRB. It was designed to help industrial unions like the United Auto Workers to organize large, vertically integrated industrial corporations like General Motors. These corporations dominated the US economy and were fiercely anti-union. The NLRA process was all but tailor-made for these conditions, certifying unions one factory, one company, at a time.

However, prior to the law’s passage, unions were strong in industries that looked a lot like today’s franchised chains: in construction, garment manufacturing, coal, and other industries, employers were small and decentralized, and layers of contracting and subcontracting were common. Instead of organizing large employers one at a time, unions focused on controlling entire regional markets through master contracts covering all employers in an area. Unlike in the auto or steel industry’s bureaucratized corporate hierarchies, in these fragmented industries, union efforts to set labor standards across the market were more important than exercising power within any individual firm. For these unions, the best way to raise wages was to regulate them out of competition altogether.

The major weakness of this approach was that contracts were legally unenforceable, and didn’t cover non-union employers at all. Union wages were always vulnerable to undercutting by low-wage employers outside the master contract. That dynamic briefly changed with the National Industrial Recovery Act (NIRA) of 1933, part of the so-called First New Deal that was thrown out by the Supreme Court. Under the NIRA, businesses and government enacted fair competition codes that were legally binding on all firms in a given industry. While in heavy industry corporations largely ignored labor and simply used the codes to form cartels, in industries like construction, garment manufacturing, and coal mining, unions were deeply involved in writing the codes.

Those codes allowed unions and employers to bargain standards that were truly binding industrywide, at least in certain regions. The Appalachian Coal Agreement of 1933 showed that the NIRA machinery could be mobilized in support of workers. Under the agreement, the United Mine Workers’ collective bargaining agreement was brought into the industry code, putting the federal government’s enforcement power behind the union contract. Wages rose and union membership blossomed. Similarly, much of the women’s clothing industry code incorporated the terms of the International Ladies’ Garment Workers’ Union contract, and stipulated that future collective bargaining agreements would be similarly adopted. Within eighteen months, membership in the ILGWU increased five-fold.

With its sectoral council, Fight for $15 aims to do something similar. While less comprehensive than the NIRA codes—the California council only has power over wages, working conditions, and training, not the full range of labor and competitive practices governed by the NIRA—the council will mark the first time franchisers and franchisees have had to come to the table with workers. In preparation, fast-food workers in February announced the formation of the California Fast Food Workers Union (CAFFWU). Only workers in California may join the CAFFWU. Workers can elect to pay dues and belong to the union, but rather than bargain contracts through the NLRA-governed process, the workers and their union will participate in the wage-regulating council.

There are some disadvantages to this model, in comparison with an NLRB-certified labor union like Starbucks Workers United. Workers covered by council-regulated wages cannot be required to pay CAFFWU dues, limiting the financial stability of the organization, and the subjects of bargaining are confined to wages, working conditions, and training rather than full range of subjects—including discipline and termination—that NLRB-certified unions can bargain over. Sectoral councils will never replace unions, with their full body of rights to bargain and strike. And in 2024, with the UAW seemingly poised to begin rebuilding traditional unions, this would seem the wrong time to abandon the NLRB. Ultimately, Congress must fix the NLRA if workers are to have a meaningful right to collective bargaining in the United States. Among other things, that means removing the obstacles that prevent workers from organizing unions in fast food and other franchised and subcontracted industries, by creating a strong joint employer standard.

However, in the meantime, states can supplement federal law by creating sectoral councils like the one in California for workers who want them. In establishing this model of sectoral bargaining, California fast-food workers have given up none of their rights under the current NLRA. Once labor law is finally reformed to restore the spirit of the act and the robust rights that workers are supposedly guaranteed, the CAFFWU may even morph into a traditional union. Until then, the California experiment demonstrates both the promise and limits of organizing outside federal labor law.

Brian Callaci is chief economist at the Open Markets Institute and a visiting assistant adjunct professor of economics at John Jay College, City University of New York.