Nurturing the Nest Egg

ELLIOT ZWIEBACH

The future financial security of workers will be the focus of this year's labor negotiations, with pension funds expected to be the key bargaining issue in several rounds of bargaining, industry observers told SN.

With pension funds tied to fluctuations in the stock market, and the market in flux, leaders of the United Food and Commercial Workers International Union said they will be seeking larger contributions from employers to keep the funds healthy.

But it's about more than simply post-retirement incomes, Jill Cashen, senior communications specialist for the union, told SN. “It's a matter of making sure we keep the pension funds solvent and the money invested securely, so the money the members are putting aside is still there when they retire,” she explained.

The union will be looking for creative solutions, Cashen said, “because both sides are aware there's no magic formula here.”

Rodney McMullen, vice chairman of Kroger Co., Cincinnati, acknowledged the importance of pensions in this year's bargaining in comments he made to investors in December when he said the chain expects its 2009 pension contribution to exceed last year's payout of $150 million to $200 million — an amount that exceeded contributions in 2007 but ran about even with the 2006 outlay, he noted.

“The likely increase in pension costs and how they align with other labor priorities will need to be addressed in bargaining,” McMullen said.

He also said he expects that contributions to multi-employer pension plans will rise again next year. “Should current market conditions persist into 2010, we would expect contributions to increase,” he said.

Leaders of several UFCW locals said they agreed.

“Issues relating to pensions will be the first, second and third most important thing we will be talking about,” Harvey Whilly, president of UFCW Local 1262, based in Clifton, N.J., told SN. “That's the one area over which members have no control, and these next negotiations will require us to put additional money into pensions so they are fully funded.”

His local's contract, which expires April 18, will be the largest one the industry deals with this year, encompassing 26,458 union members employed at 245 units of ShopRite, Stop & Shop, Foodtown and Pathmark in the New York-New Jersey market.

Steve Lomax, president of UFCW Local 1996, Suwanee, Ga., which covers the Atlanta area, said the stock market “hasn't been good to any pension plans in the last few years, and we need the employers to put more money in.”

“Congress gave the employers some relief a year ago, but the losses in the stock market are a reality, and the time has come to make up the losses that have been incurred.”

Lomax will oversee negotiations on the industry's second-largest contract this year, which involves 12,271 employees at 171 Kroger stores in Atlanta, plus nearly 1,200 other Kroger employees at 14 stores in the Savannah-Hinesville region of Georgia. Both contracts are scheduled to expire Sept. 12.

Kroger has the industry's biggest stake in this year's labor talks, with 13 contracts set to expire during 2009 in Atlanta; Dallas; Denver; Dayton, Ohio; and Roanoke, Va., that cover nearly 37,500 workers — approximately 28% of the 133,464 union members whose contracts are set to expire this year.

The weakened economy could mitigate any possibility of work stoppages initiated by either side this year, Gary Giblen, executive vice president of Goldsmith & Harris, New York, pointed out.

“Given the financial challenges facing the individual members, it's unlikely the unions will look for a strike — and the employers are certainly not in a very good position, either, to take a strike,” he said.

But the pressures are stronger on the employees, he added.

“It seems to me the poor economy takes some bargaining power away from the union and gives it to the employers, because it makes workers want to hold on to their jobs rather than putting their salaries and benefits at risk in a shaky economy,” Giblen said. “So I don't think union members will support any militant actions that would threaten their job security. That could make it harder for the union to make any significant gains.”

Cashen, of the international union, said she doesn't think the economy weakens union members in terms of their bargaining position, although strikes are not the only weapon the UFCW has, she pointed out.

The UFCW has developed more creative ways of “holding the line,” she said, since the last work stoppage — the 141-day strike-lockout in Southern California in late 2003 and early 2004 — “and we have no reason to believe we won't be able to continue to build on the relationships we've developed with employers since then,” she explained.

“With the election of Barack Obama, there's a national spirit of coming together in this country, and although the economy is going through rough times, I don't believe we're going to turn on each other. And with consumers shifting from restaurants to grocery stores, it's been a good time for the industry.”

However, while no one, including the union, enters negotiations with a strike in mind, she said, she was unwilling to concede that the weak economy would dampen member support if a strike were deemed necessary. “And because of the lack of work stoppages since 2004, the union's strike funds are in good shape,” Cashen added.

Whilly, of Local 1262, also said the economy will not stop the union from taking a tough stand — especially against what he called “the cavalier attitude” on the part of A&P, Montvale, N.J., involving the chain's interest in negotiating a separate contract for the Pathmark stores it acquired a year ago.

“We're praying for peace, but preparing for war, because we don't intend to give A&P a lesser contract,” Whilly told SN. “Though times are as tough as they've ever been in our lifetime, I see no problem rallying employees at the other three companies covered by the agreement [ShopRite, Stop & Shop and Foodtown] to support their brothers and sisters at Pathmark if necessary.”

A&P officials could not be reached for comment.

Two potential legislative proposals — involving national health care and the Employee Free Choice Act — are unlikely to have much impact on this year's negotiations, observers said.

“Anything Congress comes up with on national health care — if it comes up with anything at all — will probably take several years to take effect,” Lomax pointed out.

Likewise, any expansion of union membership that might result from Congressional approval of the Employee Free Choice Act — which would make it easier for employees to become part of a union — might impact future rounds of bargaining but would probably not affect this year's talks, another source pointed out.

However, bargaining in 2009 could be impacted by issues outside the food industry, Giblen noted.

“Right now, the United Auto Workers, the most powerful union in the U.S., is making significant concessions to keep their industry viable, and that could set a powerful precedent in favor of food industry employers as they negotiate with the UFCW,” he said.

Although Kroger has the most contracts expiring this year and Local 1262 has the largest, Local 371, based in Westport, Conn., will be among the first at the bargaining table — with talks scheduled to begin later this week on contracts covering approximately 1,500 A&P employees at Food Mart and A&P-banner stores whose agreements expire Feb. 28.

Brian Petronella, president of the local, said he sees health care rather than pension as the biggest issue in the negotiations, saying he believes the pension issue was pretty much settled in contracts his union signed with Stop & Shop and Shaw's over the past two years. “Stop & Shop agreed to substantial pension increases two years ago, and Shaw's followed suit last year, so we anticipate A&P knows it's going to have to pay what's necessary to cover future pension costs,” he said.

For Petronella, health care will be the major hurdle “because the A&P membership is somewhat older than members at Stop & Shop, which is growing, and Shaw's, which is new to Connecticut. Because A&P is not quite up to what the others are paying, the other two chains are essentially subsidizing A&P in the health care fund right now.

“But with A&P's acquisition of Pathmark, they're a much stronger company today than they were during the last round of negotiations, and they have no excuses not to pay more for health care.”

While most of those contacted by SN downplayed the issue of wages in this year's talks, Giblen said he believes wages could be an important item on the agenda, “because so many people are living hand-to-mouth in the current economy.”

“Therefore, we might see wage increases being more front-loaded than back-loaded in the contracts.”