Private Equity Fund Would Rather Shut Down a Plant Than Pay Its Workers a Fair Wage

By Art Levine, AlterNet. Posted July 10, 2009.

"Corporate mismanagement, predatory private equity, the destruction of an iconic brand and now an attempt to destroy the livelihoods of modest working families -- the story at Stella D'Oro pretty well sums up all that's been happening over the past two decades," especially in manufacturing, Stewart Acuff, the organizing director of the AFL-CIO, says.

So the strike marks an important turning point in the fight against the lowball tactics of private-equity firms determined to destroy unions to boost their own profits. Mike Fillippou says proudly, "We showed other people [in the country] how to fight this."

In addition, union advocates say the battle over Stella D'Oro underscores another reason for passing the Employee Free Choice Act: the protection it offers workers during negotiations. If enacted, Rossman and others say, the proposed labor-law reform could limit the sort of bad-faith bargaining that Byrnwood was found guilty of by the NLRB judge last week; it would do so, in part, through sharply increased penalties and mandated arbitration for stalled first-contract negotiations.

A look inside the bargaining sessions between Stella D'Oro's owners and the union demonstrates just how far companies are willing to go to abuse negotiations in order to thwart unions.

At least a year before the union contract was scheduled to expire in June 2008, business seemed to be booming, Stella D'Oro workers say. The company added major new clients such as BJs and Costco, and, Eddie Marrero says, "We couldn't keep up with all the orders." But when negotiations began in May 2008, he notes, "As soon as management sat down with the union committee, they started crying poverty."

At that first meeting in a New Rochelle, N.Y., hotel conference room, Byrnwood's tough-minded chief negotiator, attorney Mark Jacoby, and the dapper managing partner Henk Hartong III claimed that Stella D'Oro was losing $1.6 million a year and major union concessions were needed. Hartong asserted, without offering any proof, that Stella D'Oro was a "troubled company" that "can't survive under the current labor contract."

NLRB legal documents show that the company never really budged over a series of six bargaining sessions. It kept claiming financial losses and continued offering slightly varied versions of the slash-and-burn concessions it first demanded from the union. The union members ultimately voted to strike in July 2008.

Joyce Alston and the other union members were shocked by the demands being made of them. The company's offer would cut some longtime workers' wages to as little as $13 an hour in the expensive New York City area and force a steep increase in out-of-pocket health costs.

Alston told the executives, "With the level of concessions you're asking, my members won't be able to maintain their standard of living. What you're asking is cutting so deep people won't be able to stay in their homes." One company official reportedly blithely replied, "They can always find another job."

Yet perhaps the most ludicrous corporate claim of all -- rejected by the NLRB administrative judge -- was found in the company officials' legal briefs disputing any unfair labor practices. They actually insisted that they never had asserted in negotiations an "inability to pay" that would require them to produce financial documents under federal labor law, just staked out a position on what they "wanted to pay." The judge just didn't buy such semantic mumbo-jumbo and concluded they were bargaining in bad faith.

This week, even the company's plans to close the plant haven't made Alston and many of the union workers regret the decision to strike. "At the end of the day, we've done the best we could," she says.

Alston believes their fight should serve in part as a wake-up call for other Americans. "Hopefully, the American people will put a stop to firms buying up companies and then destroying them," she says. "At some point, we will not have a middle class. Our workers have taken on this fight for themselves and for everyone else. In truth, it's the fight of their lives."

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Art Levine is a contributing editor of the Washington Monthly and writes on labor and political issues for In These Times and the Huffington Post.

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