Dive Brief:

• Starbucks agreed on Thursday to pay $176,000 in restitution to employees and provide better oversight to settle a multi-year investigation into a policy that made New York City employees find replacements to cover for them when they called out sick, according to Reuters. 
• The coffee chain will set up a $150,000 restitution fund set up by a third-party claims administrator to cover current and former employees who worked in New York City Starbucks locations from Jan. 1, 2015 to Dec. 31, 2016, who were required to find a replacement. It will pay the remaining $26,000 to the Department of Consumer and Worker Protection to be distributed to 23 workers who were identified during the administration.
• The settlement also requires the coffee chain to post education posters about the city’s sick leave policy in all New York City stores, to provide plain language information on its sick leave policy to over 8,000 employees in the city and then follow up within six months describing its compliance to city regulators. This agreement will run for at least three years, but could be extended if the chain violates it.

Dive Insight:

Not long after New York City started to investigate Starbucks' sick leave policy, the company revised it nationwide, allowing employees to accrue one hour of sick leave for every 30 hours worked. That sick leave can also be used to care for a family member.

While the settlement amount is likely a drop in the bucket for Starbucks, which had sales of over $19 billion in 2018, the fact that it changed its sick leave policy soon after New York City’s original probe reveals the impact that regulatory oversight can have on restaurant chains. 

New York City, in general, has been particularly labor-friendly, and began investigating allegations of claims that Chipotle violated the city’s Fair Workweek Law by not providing schedules at least two weeks in advance, adding that the fast casual chain also violated the city’s sick leave law by offering an inconsistent and confusing policy.

The Starbucks case originally stemmed from accusations that the chain violated the city's Earned Safe and Sick Time Act from April 2014 to February 2016 because it required employees to find someone to replace them before calling out sick, or face disciplinary action such as termination, according to Reuters. The city law requires employers with five or more employees working over 80 hours each calendar year to provide paid safe and sick leave.

Starbucks has been rethinking its employee benefits lately as well, enhancing its mental health benefits to offer six free visits to a mental health provider through its employee assistance program and adding surrogacy and intrauterine insemination reimbursement for procedures not covered by insurance to its Family Expansion Reimbursement program. Offering benefits like these and showing accountability when the company violates labor laws will be key to improving labor retention during a time when QSRs are facing an ongoing labor shortage.