Union Faces Thin Funds As Pacts Set To Run Out

By DAVID GREENBERG and KATE BERRY

Staff Reporters

The cost of the supermarket strike in Southern California is rapidly depleting the strike fund of the grocery workers’ international union in Washington, D.C., which could run out as early as May just as a series of contracts begin to expire in Northern California and six other major cities.

In an attempt to avert a crisis, United Food and Commercial Workers officials in recent weeks have asked for financial assistance from the national AFL-CIO and other affiliated unions. The AFL-CIO has also taken the lead on setting up a national strategy.

In the aftermath, UFCW leaders have been criticized for failing to quickly grasp the resolve on the part of employers in the four-month-long strike, showing little strategic vision and poor planning.

“Clearly they could have done things differently,” said Mike Garcia, president of Local 1877 of the Service Employee International Union, who led the Justice for Janitors campaign that won big gains for commercial building workers downtown in 2000. “They clearly underestimated how deep the will of the markets is to win concessions, so now there’s a willingness to move on to more aggressive strategies. You can’t blame them for wanting to resolve things.”

The main driver of union strategy over the past few weeks is the realization that more than 125,000 union workers in Northern California and six other cities around the nation could join the 70,000 now on strike or locked out over the next seven months. Contracts have already expired in two of those cities, Indianapolis and Phoenix. On March 27, contracts covering 30,900 workers will expire in the Baltimore-Washington, D.C. area. Seattle, with 19,000 covered workers, comes up for renewal on May 2.

“It was clear that part of the adjustment that needed to be made was to look at the big picture relative to other contracts coming up,” said Ron Judd, Western regional director for the AFL-CIO, who is coordinating strategy for the UFCW in Northern California and the Puget Sound area of Washington state. “We have to apply pressure to get a fair agreement in Southern California while aligning the deck chairs to make sure we don’t repeat the fight for those other contracts.”

Depleted funds

The seven Southern California union locals that have been on strike against Safeway Inc.’s Vons and Pavilions supermarkets, and locked out from Kroger Co.’s Ralphs and Albertson’s Inc. since October have long since depleted their own strike funds.

They’ve now cut weekly payments to striking members to as little as $75 a week for some grocery clerks. Local leaders say they are aware of the need to balance strikers’ needs with the overall financial viability of the union.

“Certainly the international has spent a great deal of money in Southern California, but they have to look at all the other contracts in the country so they won’t drain the strike fund,” said Connie Leyva, president of UFCW Local 1428 in Claremont.

While AFL-CIO officials said that they are not in charge of the bargaining, they are taking on an increasingly visible role.

“The AFL-CIO has no authority to take things over,” said Mark Theodore, a partner in the L.A. office of Proskauer Rose LLP, a law firm that advises management on labor issues. “But they can attach conditions to any monetary help. Their representatives are now going to guide this strategy.”

One example of its influence: the AFL-CIO has established a “Hold the Line fore Healthcare Fund,” its first ever Internet campaign, to generate donations from member unions and activists throughout the nation in support of the strike.

“They need the labor movement nationally because Safeway, Kroger and Albertsons are national companies that have revenues coming in from all geographic areas,” said Joe Uehlein, national director of strategic campaigns for the AFL-CIO. “So now we’re expanding the campaign into some of their largest market areas.”

Last week, employers and labor representatives in Southern California resumed negotiations under federal mediator Peter Hurtgen. It was the first time the two parties had met in one month, after informal talks without Hurtgen broke down.

Hurtgen has imposed a news blackout on the talks, but as they continued late into the evening on Feb. 12, it appeared that progress was at least possible.

One source said the two sides were talking “conceptually,” and hadn’t yet gotten down to detailed bargaining.

“The federal mediator is really pushing for something to happen, so maybe it will,” the source said.

The international began with a strike fund of between $70 million and $80 million. As locals depleted their own strike funds in the first two months of the walkout, the international has contributed up to $10 million a week to pay strikers on picket lines in Southern California.

The international also is using lines of credit and real estate holdings to generate additional monies. UFCW officials refuse to say how much money remains in the strike fund or in other caches.

The union is trying to raise money from other locals.

In one example, Local 870 in Hayward, Calif., with 4,500 members, has donated $25,000 to Southern California locals even though the local has its own strike fund of just $800,000, and its contract with the three chains is set to expire in September. “At some point there’s nothing left to give away,” said Daniel Mitchell, a professor of management and public policy at UCLA.

Mortgaging the union hall

Southern California locals are broke, or even worse in hock.

UFCW Local 324, with 13,500 workers members in Long Beach and Orange County, paid striking members $29 million from Oct. 11 through Feb. 6, for an average of $1.7 million a week over the 17-week period, said Greg Conger, president of Local 324. The payout has been reduced to $1.5 million due to a reduction in benefits per striking worker and the fact that roughly half the workers found jobs elsewhere.

Yet Local 324 began with a strike fund of just $10 million. The additional funds came from the international union and other sources, Conger said, such as a death fund and a mortgage against its headquarters in Buena Park.

“We’re pretty much in the same boat,” lamented Rick Icaza, president of Local 770 in Los Angeles.

He declined to give specifics, as did Mike Straeter, president of Local 1442 in Santa Monica. “I don’t care to discuss that just like the employers don’t care to discuss how much money they’ve lost,” Straeter said.

Of course, the supermarkets have lost money as well.

Last week, Safeway Chief Executive Steven Burd estimated that the company had lost $167.5 million due to the strike in the fourth quarter ended Jan. 3, before the effect of tax benefits.

Overall, the company lost $695 million in the fourth quarter, compared with a loss of $1.05 billion for the like period a year ago. Safeway also withdrew its financial guidance for the remainder of the fiscal year, citing uncertainty on when the strike will end.

Nevertheless, Burd insisted that the grocers’ hard stance would pay off.

“We are very conscious about doing what’s right for the business,” he said on a conference call with investors. “We’re confident the economics will prove out.”

(Kroger and Albertsons are scheduled to report quarterly earnings in March.)

It’s the UFCW, though, that finds itself on the defensive after being broadsided by the supermarkets’ demands for major contract concessions.

The supermarkets want to roll back health care benefits to a two-tier system that would provide less insurance to new employees, and set up a two-tier pay scale.

The supermarkets also want employees to contribute health care premiums of up $15 a week for a family of four. Union workers currently pay no out-of-pocket premiums.

After four months on the picket lines, local union officials and labor leaders are trying to downplay the reality that they’ve been caught off-guard.

“Now that they realize how deep the will of the markets is to win concessions, there’s a willingness to move on to more aggressive strategies,” said Art Pulaski, executive secretary-treasurer of the California Labor Federation.

Lockyer Leads Challenge to Chains’ Mutual Aid Pact

By DAVID GREENBERG, Staff Reporter

The mystery surrounding the major supermarket chains’ secret mutual aid agreement continues, and the veil is not likely to be lifted soon.

Six months after its creation, three months after the chains admitted its existence and nearly two months after the document was grudgingly handed over to Bill Lockyer, the California attorney general in early February filed suit against the region’s major supermarket chains, alleging that their agreement violates state and federal antitrust laws.

Still, state law prohibits Lockyer’s office from disclosing materials received pursuant to an investigative subpoena, said Tom Dresslar, the attorney general’s spokesman.

“The unions have tried to get copies in their own right but they haven’t tried to get it out of us, as far as I know,” he said.

Lockyer has been a vocal supporter of the UFCW, going so far as to walk the picket lines and speak at pro-union rallies outside supermarkets. Even so, Dresslar insists that Lockyer is not doing the union’s bidding.

“The only people we’re in cahoots with in this case are the shoppers in Southern California,” he said. “We’re representing their interests and nobody else’s.”

Nevertheless, some of the information could be valuable to the union cause. UFCW officials want to know the specifics of the revenue sharing agreement to better quantify the fiscal pain each chain is shouldering in the strike and lockout, which is well into its fourth month.

Lockyer filed suit in U.S. District Court in Los Angeles on Feb. 2, alleging that the mutual aid pact between Safeway Inc., Albertsons Inc. and Kroger Co. hurts customers by discouraging competitive pricing.

The chains were served with the 10-page complaint on Feb. 4 and have until Feb. 24 to respond. Only in the event of a trial can the agreement be released to the public.

The lawsuit did provide a few tidbits of the pact’s contents. It includes Kroger’s 101 regional Food 4 Less stores, for example. (Food 4 Less’s contract with 5,700 area employees expires at the end of the month.) The suit also states that terms of the pact call for the distribution of any shared revenues to take place after a settlement with the unions is reached.

Labor analysts said revenue-sharing agreements typically contain a formula derived by the percentage of market share each chain held in the region before the picket lines began. They don’t usually entail the sharing of profits, although they may factor in strike- and lockout-related expenses such as additional security, travel or advertising costs, or the cost of training replacement workers.

The grocers’ agreement that a strike against one chain would be followed by the lockout of employees at the others was also part of the deal.

“It sounds like they are sharing the burden of the labor dispute to get to where they want to be,” said Mark Theodore, a partner advising management in the Los Angeles office of law firm Proskauer Rose LLP.

Terry O’Neil, a spokesman for Ralphs, refused to comment on the pact other than to acknowledge it exists.

Whatever information does come out could influence bargaining.

Union leaders, for instance, have largely refused to divulge how much money they have in their strike funds or how much financial assistance they have received from other union groups. They have also been reluctant to discuss the number of Vons and Pavilions workers who have crossed picket lines and returned to work.

Mutual aid agreements have been used numerous times, most notably by the airlines in the 1960s and 1970s. Lockyer’s lawsuit is looked upon as a long shot.

“If chains were to try and keep (other) competition out through means of a collective bargaining agreement, that would clearly raise a lot of antitrust concerns because you are dealing in the product market rather than the labor market,” said Daniel Mitchell, a UCLA professor of management and public policy. “But this is labor market stuff.”

Dresslar said Lockyer would press on regardless of the outcome of negotiations, which resumed Feb. 11 under the guidance of federal mediator Peter Hurtgen.

“If they broke the law, they broke the law,” said Dresslar. “If they settle with the union, that doesn’t mean our antitrust action is going to go away.”