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How FreshDirect Delivers Misery Along With Your Groceries--And How Workers and the Community are Fighting Back

The upscale grocery delivery service pays less than $9 an hour, has faced discrimination complaints, and is a union-buster--so why is New York giving it a handout?
 
 
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New York City, like most of the country, is hurting for jobs—good jobs that pay a living wage and provide benefits so that people can support their families. Yet billionaire mayor Michael Bloomberg, along with Governor Andrew Cuomo and Bronx borough president Ruben Diaz Jr., is about to hand over $129 million in public money, through tax exemptions and direct subsidies, to FreshDirect, a grocery delivery service that is notorious for underpaying its workers, has faced multiple accusations of discrimination and has been accused of using all sorts of shady tactics to block its workers from joining a union.

FreshDirect has made its home for years in Long Island City, Queens, but now claims to need a bigger facility. After New Jersey's governor Chris Christie waved a $100 million package of subsidies and tax breaks at the grocer, New York's politicians felt the need to win its allegiance back. New York Times reporter Michael Powell wrote of the plan, “The deal puts the welfare in corporate.”

FreshDirect, which mainly delivers to affluent neighborhoods in Manhattan and Brooklyn, advertises fresh and local groceries, ready-made meals, and other attractive options to busy, middle-class urban consumers. But its delivery drivers and warehouse workers make less than $9 an hour, and the company, co-founded and headed by a former investment banker, Jason Ackerman, has no plans to deliver its products to the South Bronx community where it wants to build its 500,000-square-foot taxpayer-funded facility. New York City Public Advocate Bill deBlasio recently used the firm as an example in arguing that the city should require a stricter code of conduct for companies that receive public assistance. Currently, he wrote, “we essentially end up subsidizing some owners of big businesses to mistreat workers, keep profits for themselves and suppress fair bargaining.”

Mayor Bloomberg and borough president Diaz claimed in an op-ed that “FreshDirect is a true New York success story, growing over the last decade from a small startup to a company with almost 2,000 employees. Small businesses are the backbone of our city; when they grow, we want them to grow here in the five boroughs — not in the suburbs or in another state.”

But local activists and the company's own workers aren't sure they'll see any benefits from the move, whether in jobs or in access to better food—certainly not enough to outweigh the negative impact on their neighborhood from the company's trucks streaming in and out. While the company's workers struggle for fair treatment, South Bronx residents are organizing to protest the move.

South Bronx resident and community board member Mychal Johnson told AlterNet that the residents are tired of having their problems ignored while the city showers cash on corporations. “The South Bronx is the poorest congressional district in the nation, continuously dumped on with all the worst New York City has to offer.”

Taking Advantage of the Bronx

Currently, FreshDirect will only deliver to the wealthier, northwestern Riverdale and Kingsbridge sections of the Bronx. Ackerman, WNYC recently reported, claimed “We absolutely would be in the Bronx,” except for the fact that “we've always felt that the Bronx has not wanted our service.” He also said that while negotiating the tax break and subsidy package that would keep the company in New York, the question of whether FreshDirect would deliver to the neighborhood that will house the company never came up.

Part of the problem for the community is that FreshDirect, which sells organic and local produce as well as more familiar brand-name groceries, doesn't accept SNAP (Supplemental Nutrition Assistance Program) or WIC (Women, Infants and Children) benefits, upon which 66 percent of South Bronx residents depend to feed their families. Even some food trucks and carts accept these benefits, so residents argue that FreshDirect is perfectly capable of taking them if it wants to.

“It really doesn't fit their business model to say they accept food stamps, as they're trying to service people who live in affluent areas,” Johnson said. “Their customer base is people who want to have their food delivered to their door, not people who need to have fresh food or good service or access to decent foods or variety or choice.”

The biggest argument for building FreshDirect's facility in the Bronx is, of course, jobs. But Johnson pointed out that the company has only promised to create 1,000 jobs over 10 years, and that it's promised only 30 percent of those jobs to South Bronx residents. That's only 300 jobs for a borough with a 14-percent unemployment rate and 39 percent of its residents living in poverty.

Sandy Pope, president of Teamsters Union Local 805, which has been working to organize FreshDirect's current workers, thinks the money could be much better spent actually helping the South Bronx. “Why do we have little trucks that leave instead of getting big trucks that come in with food for supermarkets here?” she asked.

Johnson agreed. “We definitely need more choices and better, healthier choices, but give that money to incentivize that kind of business to come here rather than giving one business $129 million. You could get a lot more impact by diversifying and giving it to a lot of businesses,” he said.

John C. Liu, the city comptroller, opposed the deal, saying, “For the cost of this benefits package the city could give 4,385 students full four-year scholarships to CUNY or hire 1,458 new teachers or pay for 350,000 GED test-prep programs or launch a micro-lending program for minority and women entrepreneurs.”

Part of the anger at FreshDirect's move comes from the fact that residents feel completely shut out of the process. The decision was announced without any meetings with the community board, of which Johnson is a member. “It never came before the land use subcommittee, it never came before the full board, we only heard about the plan when it was announced, then two days later there was a public meeting at the IDA office, in the financial district,” Johnson, a member of the board, said. “Nothing happened in our community, where residents of this area could voice their concerns about how this would affect them, until it was already a done deal.”

Sandy Pope, who was involved in a community fight over development at the Red Hook piers in Brooklyn, said during that fight there were numerous meetings in the neighborhood with the community board. When it came to the less-desirable real estate in the South Bronx, though, residents were left out of the loop, their input not considered.

Looking at FreshDirect's sweetheart deal, Michael Powell noted that the company pays $48,000 a year (nearly twice what its average warehouse worker makes) to a well-connected lobbyist, Evan Stavisky’s Parkside Group. This year, with the move coming, Powell reported that the company added Steve Polivy of Akerman Seterfitt, giving him $17,825--so far--to lobby city politicians and the Bronx Overall Economic Development Corporation, a public agency, for subsidies for FreshDirect.

Pope contended that the company has never been viable without government aid—from the very start, it relied on subsidies and tax breaks from the city. Without taxpayer dollars and low pay for its workers, she said, the company wouldn't still be in business. “As investors, the EDC, whoever is making these decisions, they're not looking at the viability of this company,” she said.

But Bronx borough president Diaz is all in, even setting up a Facebook page for “supporters” of the move. Yet that might not be working out the way he thought it would. One of those “Bronxites for FreshDirect” says “this is ridiculous!!! further low wage jobs, pollution and gentrification!! no to fresh direct! what are u thinking mr borough president!” Another says “If they won't deliver to me (12 blocks away from proposed site) I don't want them here. The insult makes me want to spit out of sheer disgust as to how we are a 2 class city.”

“I think they're using us,” Josephina Colon, a South Bronx resident, told AlterNet.

Exploited Workers

Even if FreshDirect does bring 300 new jobs to the South Bronx, what kind of jobs will they be?

FreshDirect's current workers barely make a living. Nearly 40 percent of the company's employees make less than $25,000 a year. For hauling boxes in the refrigerated warehouse in Long Island City, workers get $8.75 an hour; drivers make $8 and the chance of being tipped—but since the company already charges a $5 delivery fee and requires customers to pre-pay by credit card, tips are anything but a sure thing.

Local 805 has been struggling for years to organize the FreshDirect workers, who Pope points out make about 20 to 25 percent less in wages and benefits than other non-union workers in the city. The company, though, has used every trick in the book to block the organizing drive.

Public Advocate deBlasio wrote in 2010 that the workers make only two-thirds of what the average warehouse worker makes nationwide—this in one of the most expensive cities in the country. The healthcare package FreshDirect offers is unaffordable to most of its employees, Pope said. And in the past four years, the company has faced 27 discrimination complaints and nine unfair labor claims filed with city, state and federal agencies.

“We spent 2010 and 2011 working on pressuring FreshDirect to just agree to neutrality, no card check, just an expedited election,” Pope told AlterNet. The maintenance workers led the way in the union fight, but, Pope said, at the last minute the company moved workers into the maintenance unit, stacking the vote against the union. Still, even with all the company's pressure, they only lost the union election by a single vote.

Low-wage jobs like the ones FreshDirect provides often leave workers dependent on public assistance to pay their bills. So taxpayers end up on the hook both for the subsidies and tax breaks given to the company to keep it from leaving town, and then on the back end, paying for workers who can't afford health insurance but still get sick, or can't afford to feed their families without SNAP and WIC benefits The Bronx already has plenty of working poor residents struggling to get by. Will 300 more low-wage jobs change anything?

Pope remains convinced that the company is only viable because the government keeps it afloat. “You've got a company that has not yet proven they can operate without subsidies, with an underpaid workforce with no benefits. What if they actually had to pay people even minimally OK wages and benefits?” she asked.

Immigration Raids and the Chill Factor

In the midst of the Teamsters' organizing drive at FreshDirect, a surprise Immigration and Customs Enforcement audit was announced, checking the low-wage employees for immigration documents. According to Pope, about 300 workers were driven off by the immigration check.

Pope suspects the company called in an audit in order to break up their organizing drive. It wouldn't be the first time ICE has conveniently arrived just in time to shut down workers' attempt at forming a union.

Under the Obama administration, silent ICE audits have replaced worksite raids as the method of choice for cracking down on undocumented workers. While there are consequences and penalties against the employer, it’s the employees who bear the brunt of the impact as they are the ones out of a job. "If you’re an employer in a facility being unionized, an ICE audit is basically a gift in disguise because firing undocumented workers turns into an act of compliance with the law, as opposed to busting a union,” Carlos Jimenez, an organizer with the Service Employees International Union, said. 

It's hard to prove for sure what triggers an investigation, he noted, because they tend to target low-wage workplaces, which tend to have a concentration of undocumented workers, and also tend to be a focus for labor unions attempting to organize workers. The raids, while on the surface not clearly connected to a union drive, don't actually make conditions better for the workers who do remain. “It's not like employers start treating their employees any better once they verify they're all documented," Jimenez pointed out. “In fact the raids probably have the opposite effect; the people who remain might start to associate the firings with their efforts to make improvements at work. And undocumented workers at other facilities might fear that if they try to form a union, the same thing will happen to them."

That's certainly been the case for FreshDirect. After the raid, Pope noted, the workers have been less likely to speak out. “They just felt like anything could happen,” she said.

Greenwashing and High-Tech Cred

FreshDirect was ranked as one of New York City's “top startups” in 2010, valued then at $300 million, but despite its high-tech gloss relies, as we've seen, on a decidedly low-tech business model—low-paid warehouse workers loading lots of trucks that are driven by low-paid workers to the doorsteps of, for the most part, harried middle-class Manhattan and Brooklyn residents. The sleek 21st-century image of a green web-based company delivering local food (at premium prices), fresh produce, supporting local farmers, using recycled boxes, relies on a fleet of trucks that still run on diesel (despite years-old promises to replace them with biodiesel and electric vehicles).

The (non-binding) promise FreshDirect made to the Bronx is that it will convert, within five years, to a completely green fleet of trucks, but Bronx residents don't believe it. A website set up to oppose the company's move and attendant subsidies argues, “FreshDirect would exacerbate asthma rates among a community already facing asthma hospitalizations at five times the national average.FreshDirect would add upwards of 2,000 diesel truck trips per day through a residential neighborhood. The same public land set to house FreshDirect already holds a FedEx hub making over 1,400 daily truck trips through the neighborhood, the New York Post printing and distribution center, and a 5,000-ton-per-day waste transfer station, one of four waste transfer stations within a 1/8 mile radius of the proposed site.”

Pope said that larger trucks delivering groceries to local stores around the city have to observe stricter rules after a Department of Transportation study on how to reduce pollution, but by subsidizing FreshDirect, the city is nowencouraging the propagation of little trucks all over the city. In 2009, then-attorney general (now pro-FreshDirect governor) Andrew Cuomo came to a settlement with FreshDirect that included $50,000 in fines for violating anti-idling laws after city residents complained about the trucks idling and releasing pollutants in their neighborhoods. And as far back as 2007, the company promised to switch to biodiesel and plug-in electric vehicles—promises that have so far not come to pass.

“We're giving them $10 million to buy trucks from Smith Electric, they're saying within five years that they're going to convert their entire fleet,” Johnson commented. “If they didn't do it in 2007, why would they now? It's just telling us fairy tales.”

Johnson also pointed out that the Harlem River Yards land where the FreshDirect facility will go was supposed to be used to reduce traffic by developing a rail line. The land is owned by the New York State Department of Transportation, and has been leased for 99 years to Harlem River Yard Ventures, which is owned in turn by real estate developer Galesi Group. Yet there has been no development on the land since it's held the lease—the only thing that's happened, Johnson said, is that the Bronx residents can't access their waterfront.

Despite claims that the area is non-residential and thus wouldn't disturb the community or add to the air quality problems, Johnson said there are 400 housing units nearby, and that the whole area has been rezoned as a mixed-use area so that residents can live and work in the same spaces.

The biggest problem with the FreshDirect move, Johnson said, is that none of the promises the company had to make to the city are binding. And while officials might talk tough about recouping subsidies if the corporation doesn't come through, Michael Powell pressed the president of the public Bronx Overall Economic Development Corporation as to whether she'd ever done so before. The answer was no.

New York City residents, like people around the country, continue to struggle with a rough economy, stagnant wages and rising cost of living. Do they really need to hand out millions in deals to corporations that, despite a shiny quasi-progressive reputation, are just perpetuating a race to the bottom on wages, exploiting workers and relying on corporate welfare to rake in the profits?

Mychal Johnson and Bronx residents think not. “Enough is enough, that's why we're standing up.” 

Sarah Jaffe is an associate editor at AlterNet, a rabblerouser and frequent Twitterer. You can follow her at @seasonothebitch.