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Shortly before the inauguration of President Barack Obama, the manager of a Whole Foods grocery store in the San Francisco Bay Area gathered his employees in a conference room for a chat about labor organizing. “This is not a union-bashing thing whatsoever,” the manager began, adding, however, that he’d called the meeting because Whole Foods believed Obama would sign the Employee Free Choice Act, legislation intended to ease unionization that was opposed by the company’s lobbyists. According to a tape of the meeting obtained by Mother Jones, the manager went on to imply that joining a union would lead to reprisals: “It’s interesting to note that once you become represented by the union,” he said, “basically everything, every benefit you have, is kind of thrown out the window, and you renegotiate a contract.”

“I think it’s probably fair to construe [that comment] as a threat,” concluded Tim Peck, a representative of the National Labor Relations Board (NLRB) in San Francisco, after Mother Jones read him quotes from the meeting, one of several anti-union trainings held by the company in recent months. Peck pointed out that labor law bars employers from threatening to strip benefits from workers in retaliation for unionizing. “The ‘flying out the window’ [comment] kind of suggests that the benefits are gone,” he noted. Legally, “that wouldn’t pass muster.”

That Whole Foods stands accused of union busting comes at an inconvenient time for the company, which late last month unveiled the Committee for a Level Playing Field for Union Elections, a partnership with Starbucks and Costco that aims to rewrite the Employee Free Choice Act. This year’s top priority for organized labor, EFCA would allow employees to form a union automatically if a majority of them sign pledge cards—a plan known as “card check”—instead of requiring them to vote in secret elections that unions say employers can manipulate. Whole Foods opposes card check, yet has rankled business interests by suggesting other ways to make it easier for workers to unionize, such as guaranteeing union campaigners access to workers and boosting enforcement and penalties for labor law violations. “This is a third way,” says Whole Foods’ attorney Lanny Davis, a former special counsel to President Bill Clinton and self-described “pro-labor, liberal Democrat.”

Unlike Costco, where 20 percent of workers are represented by the Teamsters, Whole Foods and Starbucks stores haven’t been organized by traditional unions. And yet their cultures are steeped in the language and norms of the labor movement. Starbucks calls its workers “partners” and Whole Foods dubs them “team members.” A “Business Conduct Helpline” allows Starbucks baristas to a report workplace issues anonymously, and special committees of Whole Foods workers and managers resolve disputes. Both companies offer employees relatively generous wages and health benefits and routinely make Fortune’s list of “Best Companies to Work For.”

The firms’ granola reputations could give Democrats political cover to support a compromise on EFCA, averting a likely Republican filibuster. Yet the stores’ unique, do-gooder mentality paradoxically has left little space for actual unions. In 1997, Starbucks CEO Howard Schultz wrote that he wanted workers “to believe in their hearts that management trusted them and treated them with respect…If they had faith in me and my motives, they wouldn’t need a union.” Whole Foods’ avowedly libertarian CEO, John Mackey, has compared the prospect of having unions at his stores to “having herpes.” An internal Whole Foods document listing “six strategic goals for Whole Foods Market to achieve by 2013,” obtained by Mother Jones, includes a goal to remain “100% union-free.”

Meeting that goal could be especially tough for Whole Foods and Starbucks if the economic downturn begins to reverse a decades-long decline in labor organizing. Consumers’ move toward cheaper food and drink is pressuring the chains to cut wages and hours. Starbucks baristas from the East Coast and Midwest have held raucous labor protests; cuts in shifts at some Whole Foods stores have prompted employees at one Bay Area location to seriously discuss unionizing.

Mackey “is not opposed to giving union organizers a fair shot to persuade his team members” to unionize, Davis says. But the reality is that both companies, neither of which would comment in detail for this story, have repeatedly resorted to tough union-busting tactics—often breaking the law along the way. In recent years they fired union organizers or packed worker rolls with anti-union employees in efforts to prevent workers from forming unions or winning union contracts, government records show.

Starbucks’ and Whole Foods’ anti-union, pro-worker stance “is the essence of benevolent paternalism,” says Kim Fellner, whose book, Wrestling With Starbucks: Conscience, Capital, Capuccino, praises many of the company’s other employment practices. “These are companies that want to do good by their workers, but want to decide what that good is, rather than letting the workers decide for themselves. And that’s a problem.” She calls the companies’ approach to EFCA “entirely consonant with the way that they have acted towards unions over the long haul. It’s the place where their social responsibility really broke down.”

The Skinny on Starbucks

In 2004, faced with the first serious effort in decades to unionize one of its stores, Starbucks launched what a former worker calls “a scorched-earth campaign” against pro-union employees. The effort resulted in more than a dozen violations of the National Labor Relations Act, a judge found in an 88-page ruling last year. “The union busting has just been absolutely relentless,” says the worker, Daniel Gross, who set out to organize the company’s store on the east side of midtown Manhattan before Starbucks fired him in 2006.

Gross and other workers, unhappy with the refusal of the Manhattan store to guarantee any full-time shifts, had planned to vote on whether to be represented by the Industrial Workers of the World. As the election neared, Starbucks brought in a manager, Fabian Vera, whose only job was to oppose the union, Gross says. Vera took workers on walks around the block to assess their positions and argue his case. Three pro-union workers were discriminatorily fired at three New York stores, the labor judge later ruled, while anti-union workers were rewarded with free gym passes and Mets tickets. In recent years Starbucks has settled five labor complaints in connection with similar practices in New York City, the Twin Cities, and Grand Rapids, Michigan. “This is not a few bad apples,” Gross says. “This is a company really undermining the right to organize.”

Despite the union’s legal victories, its effort to unionize the Manhattan

store fizzled. Starbucks challenged a 2004 ruling that had required the union election, thereby stalling the vote for the duration of the appeals process, which can drag on for up to three years. Rather than see the appeal adjudicated by a Bush-controlled NLRB, the union canceled the vote that summer. “To compare this to a fair election process just defies all credibility,” says Gross, who must wait to be compensated by Starbucks for being illegally fired until another appeal is resolved. “It’s almost impossible to describe how unlevel a playing field it is.”

Union organizers say Starbucks’ and Whole Foods’ behavior illustrates why card check, the cornerstone of EFCA, is so important. Allowing employees to sign cards to authorize union representation lets them organize below the radar of employers, preventing bosses from retaliating against pro-union workers and stalling a vote. “The choice about whether and how to form a union is something that belongs to workers,” says Ari Yampolsky, a campaign coordinator for the Service Employees International Union. “Employers should have about as much say in that as workers do about whether and how employers join the Chamber of Commerce.”

Davis, the Whole Foods lawyer, counters that card check robs workers of the anonymity of a secret-ballot election, exposing them to coercion by union organizers. Yampolsky discounts that claim, however, pointing out that the NLRB will probably design the cards to allow workers to check one of two boxes: either to form the union or to ask instead for a secret-ballot vote on the question. Moreover, the corporate world’s Fabian Veras usually know well in advance of a union election how workers will vote, Yampolsky points out. “Both sides essentially do the same thing, which is go to the workers, ask them if they support the union, and then engineer various ways to test their position,” he says. “Except the employer has profoundly more power in asking the question as well as access to workers.”

Still, Davis maintains that uneven balance of power is better solved by improving unions’ access to workers, setting a firm date for union elections, and tightening penalties for serious violations of labor law such as illegal firings. “This is not a compromise between union bashing on one side and management bashing on the other side,” he says of the proposal. “We’ll make this into a labor reform bill that levels the playing field.”

The group’s ideas mirror several proposals in a recent law review article by Arlen Specter (R-Pa.), who Democrats had hoped would protect EFCA from a filibuster in the Senate before he came out against it two weeks ago. Though Davis says 20 Senate offices have offered reactions to the plan ranging “from encouragement to extreme happiness,” it has met stiff opposition from EFCA sponsors George Miller, Tom Harkin, and Rob Andrews. “It was written by CEOs for CEOs,” the congressmen said in a statement. “It is nothing more than a classic Washington lobbying campaign intended to confuse the issues and disguise the real agenda of maintaining the status quo.”

Whole Foods vs. the Teamsters

Even after unions are certified and begin representing workers, 40 percent of them disband before negotiating their first contract. Such was the fate of the only union ever established at a Whole Foods store, a local of the United Food and Commercial Workers in Madison, Wisconsin. Once employees approved the union in 2002 and began negotiating a contract with Whole Foods’ lawyer, they asked the company to award raises more equitably, establish a grievance procedure, and protect them from arbitrary firing. The lawyer rejected the proposals but never put forth alternatives, while scheduling and rescheduling meetings that were spaced out every other month for more than a year. “They were just trying to stall,” says Debbie Rasmussen, who worked at the store’s juice bar and spearheaded the union effort. Whole Foods meanwhile hired anti-union workers while firing her and another union sympathizer on a technicality: drinking a botched latte instead of discarding it, she says.

Whole Foods employed similar tactics in 2006, after truck drivers working at its San Francisco-based distribution center voted to unionize with the Teamsters. The company fired two of the drivers, altered its sick-leave policy, froze wage increases, refused to provide information to the union that was necessary to negotiate a contract, and “harassed and disciplined employees,” found NLRB investigators, who concluded that “Whole Foods engaged in a variety of retaliatory measures to discourage union activity.” An out-of-court settlement required Whole Foods to reinstate the employees and reverse some of its policies.

Similarly, in 1999, after workers at a coffee bean roasting plant in Kent, Washington, elected to unionize, Starbucks stalled contract negotiations for a year while systematically denying employment at the plant to any job applicants who’d ever been in unions or were related to union members. The NLRB eventually forced Starbucks to compensate several workers it hadn’t hired and pay damages to a fired human resources employee who’d exposed the arrangement—though not before the plant’s stacked workforce voted out the union.

To prevent employers from stalling negotiations while intimidating and firing employees, EFCA would require deadlocked contract talks to go before a federal arbitrator—an idea that Whole Foods attorney Davis calls “way over the top.” He instead proposes stricter penalties for bad-faith bargaining. Yampolsky is skeptical of the idea, noting that proving bad-faith bargaining in court “is incredibly difficult.”

As it stands, a union that hasn’t inked a contract with an employer after a year can be voted out by employees, as happened in Madison. Though the UFCW claimed but never proved that Whole Foods illegally promoted the vote, Whole Foods now wants the right to require a referendum on union representation at any time; Mackey “wanted the right of employers to go to workers and ask for another union election if he feels the union is doing a bad job,” Davis explains.

Employees at the Bay Area Whole Foods store grant that Mackey’s model of “conscious capitalism” makes workers feel like they have a voice, but say that their rights are still subject to the whims of the men in charge. Mackey is pushing ahead with plans to build two new stores in San Francisco even as an existing store is cutting back hours, freezing hiring, and asking employees to do the same amount of work in less time, the workers say. “My opinion is, you shouldn’t open a new store if you can’t take care of what’s going on at the ones you already have,” says a worker, who asked that his name and the exact location of his store not be used for fear of reprisals. “But they are going to

take the opposite approach. If they can cut costs at our level and then open up a new store, that’s what shareholders want.”

The recent anti-union lecture at the Bay Area store has made some workers skeptical that Whole Foods will react with integrity and good faith to their organizing campaign—not to mention the broader efforts at labor law reform. As the meeting dragged on, the store’s manager falsely implied that employees in Madison who’d organized the store’s workers had been nothing more than plants from the labor union. “Union organizers got into the store [and] while they were employed there they started organizing the store,” he claimed. “After their job was done, so to speak, they left the store, they left the company, leaving behind team members that really weren’t the driving force behind this.

“Pretty soon thereafter, they were kind of regretful of what they had done.”