NEW YORK — The union representing most of Safeway's grocery store employees on Monday threatened to file a labor grievance and a lawsuit against the supermarket chain and the "white knight" that is buying it unless the companies agree to bargain with the union over the effects of Safeway's proposed acquisition on jobs, wages and benefits.
Calling the proposed $4.1-billion leveraged buyout by Kohlberg Kravis Roberts & Co. "corporate cannibalism," the United Food & Commercial Workers told reporters here that stopping the deal "is not our aim." Rather, union President William H. Wynn said, "our ultimate intention is to protect the rights of our workers," thousands of whom the union fears will lose their jobs if Safeway is forced to close or sell stores to pay off the enormous debt incurred in taking the company private.
Up to 500 Layoffs Already
As many as 500 of Safeway's 117,000 grocery cashiers, shelf stockers and other workers represented by the union have already lost their jobs because of the proposed sale, Wynn asserted.
Safeway countered that any recent job losses by union employees resulted from the company's "continuing program of store openings and closings" and are unrelated to the pending merger.
Separately, the grocery store chain said it will eliminate or consolidate about 300 administrative and clerical positions, representing about 25% of the employees at Safeway's headquarters in Oakland and its supply operations in Walnut Creek, Calif. Most of those employees aren't represented by a union.
Safeway Chairman Peter A. Magowan called the job cutbacks part of a "major restructuring of operations" that will result in a "substantial reduction" in employment and other corporate overhead costs.
"Inevitably, Safeway will become a smaller company," Magowan said. "Thus, we must face up to the painful but essential step of reducing jobs, and expense, wherever we can."
Released Letter to Union
Most who lose their administrative jobs, Magowan said, will receive severance allowances, extended group health-care benefits, individual career counseling and outplacement assistance at company expense.
Responding to the food union's allegations, Safeway released the contents of an Aug. 15 letter in which it told the union that Safeway "intends to comply fully with its legal obligations with regard to its employees." But "any decisions regarding corporate format or the scope or nature of corporate operations are entirely managerial in nature and are not subject to any bargaining obligations," Executive Vice President Harry Sunderland said.
In any event, the letter continues, "the matters about which you raise questions are speculative" because the deal isn't final. Hence, "we do not believe that a meeting at this time would serve any useful purpose."
Wynn said that unless the companies immediately agree to protect union employees' jobs, pensions, wages and other benefits in the event of store closings or sales, the union will lodge an unfair labor practices grievance with the National Labor Relations Board this week and may file a lawsuit later.
It also plans to take its grievances directly to the general public. The union is preparing a new television commercial aimed at "breaking the hokie" out of the deal as explained by Safeway and Kohlberg Kravis, Wynn said. Strikes and boycotts of Safeway stores haven't been ruled out, he said.
The union hinges many of its demands on concessions that it negotiated with management before Dart Group started the chain of events that drove Safeway into the arms of Kohlberg Kravis, an investment banking firm, late last month. Dart, controlled by the Haft family of Washington, launched a hostile takeover of Safeway in June.
To help keep Safeway a competitive and thriving company, union workers in recent months have given up hundreds of millions of dollars in wage and benefit concessions in exchange, Wynn maintains, for a promise that Safeway stores would remain open.
Because of the pending sale, the union maintains that this job security is now threatened and that Safeway thus is legally obligated to return to the bargaining table or risk claims by the union of several hundred million dollars.
"By selling or closing stores, the quid pro quo no longer exists," Wynn said, "and the employees have a right to restoration of the wages and benefits they gave up in the belief they were gaining stable employment in return."
Analysts have predicted that Safeway will emerge from the sale heavily burdened with debt and as a less effective competitor, predictions that the union seized on Monday.
"Because it will have a substantial debt it didn't have before this takeover," Wynn said, the union believes that Safeway will be forced to close a "substantial portion" of its nearly 2,000 U.S. stores over the next 18 months, leaving thousands of workers unemployed.