Starbucks Corp. (NASDAQ: SBUX) violated federal law, according to a judge, when it fired staff members at stores in Kansas and Missouri. The employees were pro-union, a group Starbucks management cannot abide by. Starbucks says the employees violated the company’s dress code. Which reason seems more likely, even without a court decision? Starbucks sees the union’s requests for better pay and benefits challenging its profits.
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Starbucks’ time-to-time chief executive, Howard Schulze, has done his best to keep organized labor out of the company. He has come back for a third time as CEO, in part to handle labor issues. He is on his way to retirement. This leaves new, unqualified CEO Laxman Narasimhan to handle an ugly problem that could last for years.

Starbucks almost certainly will challenge unionization case by case across the country. Starbucks has over 15,000 locations, so this will be trench warfare carried on its stores and courtrooms. The early results should send a shudder through Narasimhan.

Starbucks faces several challenges that make the issue of how it compensates its workers and how it sets their hours even more critical. McDonald’s has become a dangerous competitor. Starbucks’ service has fallen off. Even Schulze is worried stores are not attractive and that making drinks takes too long. Inflation has hit the price of coffee, milk and even the components Starbucks uses in packaging.

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Starbucks customers, management and employees are unhappy. So are its shareholders. The stock has dropped 22% this year, more than the broader market.

Starbucks needs to make sure it employs a small army of lawyers. Labor challenges are bound to come hard and fast, perhaps for years. The latest court decision suggests the investment in these legal teams will not pay off.

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