Chipotle accused by union watchdog of illegally withholding raises from unionized workers – Starbucks (NASDAQ:SBUX), Chipotle Mexican Grill (NYSE:CMG)

The National Labor Relations Board has accused Chipotle Mexican Grill, Inc. CMG Unlawfully denying wage increases to unionised workers.

What happened: The NLRB General Counsel intends to file a formal complaint unless Chipotle resolves the allegations. The charges stem from claims by International Brotherhood of Teamsters Chipotle informed workers in Lansing, Michigan, that they would not receive raises like other employees because of their union membership. As a result, the pay increase was withheld, CBS News reported.

Employees at the Lansing location voted for union representation in July 2022, making it the only Chipotle location in the U.S. to do so. The initial contract is still being negotiated.

In a statement to CBS MoneyWatch, Chipotle assured that it had “negotiated in good faith” and would resume negotiations in the fall. The company did not directly respond to the NLRB's allegations.

In April 2023, Chipotle settled with the NLRB in a separate case by agreeing to pay $240,000 to workers affected by the closure of a restaurant in Augusta, Maine due to union efforts.

This latest issue could draw attention to the labor practices of Chipotle and its outgoing CEO. Brian Niccolwho will soon join Starbucks Corp. SBUX in September, according to the report.

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Why it is important: The allegations against Chipotle come at a time of significant leadership changes and share price fluctuations.

Under Niccol's leadership at Chipotle, the company's stock price rose 650% in six years, according to analysts. But his move to Starbucks has already boosted the coffee giant's value by over $15 billion in a single day.

Despite recent challenges, some experts still view Chipotle as a good investment opportunity. Stephanie LinkChief Investment Strategist at Hightower Consultantrecently highlighted Chipotle's potential, despite a 20 percent drop in shares since June.

Price promotion: Chipotle Mexican Grill stock closed at $54.75 on Monday, up 1.94%. The stock is down 0.73% in premarket trading. Year-to-date, Chipotle stock is up 21.94%, according to data from Benzinga Pro.

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This story was created with Benzinga Neuro and edited by Kaustubh Bagalkote