Article published in the Philadelphia Business Journal on August 28, 2023.
Due to a barista’s actions and subsequent events at a Starbuck’s Philadelphia Rittenhouse Square cafe in April 2018, the company continues to suffer reputational damage.
Starbucks lost a lawsuit brought by the regional director of operations with oversight for that cafe for being scapegoated and wrongfully terminated by corporate leadership, resulting in a jury award on June 13 of $25.6 million and an additional $2.7 million awarded by the judge on August 17.
The incident occurred on April 18, 2018 when two Black men who were waiting for a business associate and had not yet made a purchase refused the request of the barista to leave the cafe. In a decision that lacked good critical judgment, the barista called the police, who led the two men out in handcuffs.
Videos of the arrest, which were recorded on customer cell phones and posted on social media went viral, resulting in calls for a nationwide boycott of the company. The arrest of these two individuals caused an uproar and accusations of bias and discrimination against Black customers.
Quoting from the Starbucks Value Statement, “With our partners, our coffee and our customers at our core, we live these values … creating a culture of warmth and belonging, where everyone is welcome.” Apparently, this was not the case the day that the two Black men were arrested.
In a subsequent decision that also lacked good critical judgment, Starbucks fired Shannon Phillips, the regional director of operations after the incident, for what the company claimed was poor leadership in the aftermath of the crisis.
Phillips, a 13-year veteran at Starbucks, countersued for wrongful termination. Phillips’ attorney argued that she was scapegoated, was a victim of reverse discrimination and was fired because she is white.
In their defense, Starbucks stated in a 2021 court filing, “During this time of crisis, Philadelphia market needed a leader who could perform,” adding that “Ms. Phillips failed in every aspect of that role.”
The allegation that Phillips lacked leadership skills was disputed by Camille Haynes, one of Phillips’ supervisors who stated that [Phillips] was “a strong performer” in her role as Regional Director and exhibited “positive leadership after the incident.”
Paul Sykes, who is Black and was not fired, was the district manager directly responsible for overseeing the Starbucks cafe where the incident took place. In his deposition, Sykes was asked specifically, “Do you believe that Ms. Phillips’ race played any role in her termination?” He responded, “Yes.” This was a damning indictment of her firing by the company.
On June 13, a jury awarded Phillips $25.6 million in punitive and compensatory damages. On Aug. 17, the judge in the case awarded Phillips an additional $2.7 million in future wages Phillips would have earned had she not been terminated.
The headline of an Aug. 17 CNN article reads, “Starbucks must pay an additional $2.7 million to employee who said she was fired for being White.” This is the type of headline no CEO wants to see about their company.
It is unknown how far up in the organization the decision to fire Phillips was reviewed and approved. Due to the sensitive nature and the media coverage of this incident, the decision of who to discipline within the management ranks should have been reviewed and approved by the Starbucks CEO.
In my nine years writing about leadership for the Philadelphia Business Journal, I have found that a major characteristic of some customer-facing employees and corporate decision-makers is the lack of common sense and good critical judgment. This can expose your company to significant liability. People without these skills should not hold customer-facing or management positions.
Stan Silverman is founder of Silverman Leadership and author of “Be Different! The Key to Business and Career Success.” He is also a speaker, advisor and widely read nationally syndicated columnist on leadership. He can be reached at stan@silvermanleadership.com.
