3 Months, and Still No Deal: Latest Grocery Talks Collapse

Secret talks aimed at ending the supermarket strike and lockout in Southern and Central California broke off with no resolution Sunday, three months from the date the job actions began.

“We’re extremely disappointed,” said Ellen Anreder, a spokeswoman for the United Food and Commercial Workers union.

Representatives of the UFCW and three supermarket companies “were trying to develop some kind of common ground” before resuming formal negotiations with a federal mediator, Anreder said. “But they weren’t successful.”

Anreder declined to provide details. A spokeswoman for the Vons grocery chain said the two sides made “limited progress.” Officials with the other chains declined to comment.

The UFCW struck Safeway Inc.’s Vons and Pavilions stores Oct. 11. Kroger Co.’s Ralphs and Albertsons Inc., which are bargaining jointly with Safeway, locked out their union employees the next day. About 70,000 workers have been idled.

During the last formal negotiating session a few days before Christmas, the union reluctantly offered what its leaders called major concessions -- a bitter pill that they agreed to swallow in hopes it might end the deadlock.

Instead, the grocery chains rebuffed the offer. There were no negotiations over the holidays, normally one of the busiest and most profitable seasons for supermarkets.

As the impasse drags on, workers are facing increasing personal hardship, and losses at the more than 800 stores involved are mounting.

That the informal talks failed underscores just how wide the gulf is between the two sides. An examination of the positions each has staked out indicates fundamental differences on the issues of health care and wages.

Here is a detailed look at what each side has been seeking:

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Health Care

The tussle over health-care benefits, the most contentious issue, boils down to this: The supermarkets want to place a firm limit on how much they pay for their workers’ medical benefits, meaning that employees would have to pick up any future cost increases -- or suffer a reduction in coverage.

For its part, the union wants to preserve what is known as “maintenance of benefits.” Under this arrangement, both parties agree on a medical plan that would be purchased with the store and worker contributions that they’ve set. The supermarkets, however, would be obligated to absorb any unexpected cost increases in the workers’ coverage.

Up to now, all grocery workers have had their health coverage fully paid for by the supermarkets (except for co-pays on certain plans, which can mean $10 out of pocket for a visit to the doctor’s office).

At the moment, health coverage costs the stores about $4.30 an hour per employee, according to company figures obtained by The Times. If health-care costs rise, the supermarkets shoulder that inflation -- or at least have to figure out how to pass it on to their customers.

The grocers say the program is the industry’s most generous health plan, and they want it scaled back. Under their offer, the stores would cap their contributions for existing workers at $4.60 an hour per employee.

The stores also would begin requiring current employees to contribute to the plan: $5 a week for an individual and $15 a week for family coverage, according to the stores’ latest proposal.

But the union contends that such a contribution, combined with what the stores would put in, wouldn’t come close to buying the level of health-care coverage now enjoyed by the workers.

Paul Fronstin, director of the health-care practice for the corporate-backed Employee Benefit Research Institute in Washington, said his “back-of-the- envelope calculations” show that $4.60 an hour “appears to be a very generous contribution” compared with what other major employers make today.

“But once you fix that contribution at $4.60, at some point in the future it’s not going to be as generous and will become below average,” Fronstin said.

If the stores’ offer were accepted, it then would be up to the plan’s trustees -- a balance of supermarket representatives and union members -- to decide what type of a health-care plan to adopt. But the grocers’ contribution would be capped no matter what, essentially leaving it up to the employees to maintain the plan.

That raises the prospect that workers, in order to preserve the quality of care they’ve had to date, would be forced to turn over an ever bigger chunk of their weekly paychecks to help fund it.

The supermarkets do not deny that workers’ health-care benefits would change. But they assert that the new setup still would buy “excellent” coverage, said one source with knowledge of the stores’ position.

Spokespersons for the chains declined to comment.

For new hires, the grocers would contribute only $1.35 an hour per employee over the life of the contract.

The supermarkets say that new hires typically are younger and don’t need as much coverage, the source explained, although the stores also insist that the new workers would have “a good plan of benefits.”

In its latest offer, the union again rejected the chains’ proposal for a two-tier benefit structure -- one for current workers and a stepped-down plan for new hires. But the union did suggest that it was willing to make modifications, including higher deductibles and co-pays, to shave $1, or 25%, off the supermarkets’ current per-hour contributions to the health plan.

That alone would save the stores about $375 million over the three years of the contract, the UFCW said.

The union also has said that it was willing to drop the “maintenance of benefits” standard -- but only if the stores build up a six-month reserve to cover unanticipated health-care costs, according to Greg Conger, president of UFCW Local 324 in Orange County, one of seven union locals involved in the dispute.

Depending on the health-care plan both sides ultimately design, Conger said, that reserve would total $160 million to $300 million.

The stores agree that some reserve is needed. But they are balking at paying that much.

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Wages

The companies simply want to lower their overall wage costs, closer to those of nonunion retail chains such as Wal-Mart Stores Inc. and Target Corp.

They aim to get there, in large part, by introducing a lower pay scale for new employees.

“For future hires, they cannot continue to provide the level of wages, Sunday premiums and health-and-welfare contributions that they do for present employees,” said one source familiar with the stores’ thinking. “They simply can’t do that and survive as an industry.”

Union leaders don’t buy it. They maintain that the grocery chains are financially strong and still growing and that they are seeking to slash labor costs merely to pad their profits.

“We have worked for years and years to get our members to where they are,” Conger said. “Why should the lowest common denominator be what we use as a gauge” of employee compensation?

Veteran supermarket cashiers, who make up about 40% of the stores’ workforces, provide a good example of the difference in where the two sides stand.

It now takes a cashier about two years to reach top scale, which is $17.90 an hour. That’s $716 for a 40-hour week, or $37,232 a year.

Although many don’t work a 40-hour week, they do earn higher pay on Sundays and holidays that can reach more than $50 an hour, and the average annual wage for an experienced grocery cashier is just under $41,000, according to store figures obtained by The Times.

Under the supermarkets’ offer, the cashier would not get a raise over the three years of the new contract, nor would the Sunday and holiday pay scales be increased from current levels.

Still, most employees would get two lump-sum bonuses -- one when the contract is ratified and another in 2005 based on hours worked over the previous 52 weeks. The payments would range from 15 cents to 30 cents an hour, depending on the type of job.

Cashiers hired after Oct. 6, when the last contract expired, would earn as much as $15.10 an hour, but it could take six or seven years to reach that level.

This permanent cut in a cashier’s top wage is part of the two-tier wage-and-benefits system the stores are pursuing. The union, in its offer last month, rejected the two-tier idea but offered to have new cashiers wait six years before reaching top scale.

The UFCW also sought across-the-board wage increases, totaling $1 an hour over the three years of the contract, for all of its members.

However, union officials said that was down from an unspecified pay raise contained in the UFCW’s original offer. The union also noted that the supermarkets originally offered one 30-cent-an-hour raise in the third year of the contract but dropped that proposed pay hike in its revised December offer.

So for now, the dispute goes on at the 852 supermarkets affected in Southern and Central California. Although both sides remain far apart, pressure keeps building to find a settlement.

Workers have gone months without a company paycheck, and most have had their health benefits expire -- which has forced them to pay out of pocket to continue coverage.

The stores, meanwhile, keep taking a financial hit. Safeway, for one, lost nearly $500 million in sales in the fourth quarter, analyst Mark Husson of Merrill Lynch & Co. estimated in a report last week.

“We believe the strike will be over in a month or so,” he ventured, because “the pain is mounting on both sides.”

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(BEGIN TEXT OF INFOBOX)

Grocery list

The long supermarket dispute in Southern and Central California is a clash over wages and health-care benefits.

Here’s a glance at key areas of dispute:

* Two-tier system: The stores want a permanently lower wage scale for new hires. The union opposes it.

* Wages: The union wants an across-the-board wage hike of $1 an hour over the three years of the contract. The grocers want to freeze wages for existing workers at current levels.

* Health care: The stores seek to cap their contributions to workers’ health insurance and require employees to start contributing. The union wants to ensure that benefits are maintained despite unexpected cost increases.

Source: Times research

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Times staff writer Nancy Cleeland contributed to this report.

--- UNPUBLISHED NOTE ---

On February 12, 2004 the United Food and Commercial Workers Union, which had stated repeatedly that 70,000 workers were involved in the supermarket labor dispute in Central and Southern California, said that the number of people on strike or locked out was actually 59,000. A union spokeswoman, Barbara Maynard, said that 70,000 UFCW members were, in fact, covered by the labor contract with supermarkets that expired last year. But 11,000 of them worked for Stater Bros. Holdings Inc., Arden Group Inc.’s Gelson’s and other regional grocery companies and were still on the job. (See: “UFCW Revises Number of Workers in Labor Dispute,” Los Angeles Times, February 13, 2004, Business C-11)

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