Union, Stores Reach a Deal to End Strike

Negotiators reached a deal Thursday night that could end the California supermarket strike and lockout, a bitter fight that highlighted the national debate over how much companies should pay for workers’ healthcare coverage.

After 16 straight days of bargaining, the deal was struck in a conference room at a hotel in Orange County. Neither side would provide details.

People close to the talks said the supermarkets scored victories in their bid to cut labor costs and curtail spending on health benefits -- in large part through a two-tier system under which new hires would earn less per hour and receive skimpier health benefits than veterans -- but the United Food and Commercial Workers Union said the proposed contract “preserves affordable healthcare” and job security for its members.

Pickets won’t immediately drop their signs and return to their old jobs. The pact must be ratified by the tens of thousands of UFCW members who until last October had worked at 852 Vons, Pavilions, Ralphs and Albertsons stores in Central and Southern California.

The voting is scheduled for Saturday and Sunday, and the results probably will be tallied by Sunday night, according to the joint statement by the seven UFCW locals in the dispute.

UFCW leaders have agreed to recommend that the contract be ratified, and approval is expected, the supermarkets said in a joint statement. As the word swiftly spread on picket lines, members, living on strike pay for nearly five months, indicated they were ready to do just that.

“I’m ready to go back to work, bro, and start serving the public again,” said Raoul Benitez, a grocery clerk supervisor who was walking the line at a Vons on Lincoln Boulevard in Santa Monica.

But Benitez, who hadn’t seen the proposed contract and hadn’t been officially briefed about it, said he wouldn’t be so happy if he discovered the UFCW had accepted an accord that would seriously reduce his benefits.

“It will bother me a lot,” he said. “It will mean that we’ve been out here almost five months for nothing.”

A statement issued Thursday night by the California Labor Federation and the AFL-CIO didn’t describe the proposed contract but said the “long and difficult” grocery dispute “gave a strong message to corporations: Any effort to dismantle affordable healthcare will face determined opposition.”

People familiar with the tentative contract said it showed that the union bargained hard to protect members on the picket lines, though at the expense of future members. Current members probably wouldn’t have to make regular contributions to help pay for their healthcare coverage for at least two years, as the union had feared, the sources said.

The supermarkets agreed to add millions of dollars to the healthcare fund’s reserves, they said. But in a victory for the supermarket companies’ bid to stem rising healthcare costs, their regular per-employee contributions to the healthcare program would be capped at a set dollar limit, the sources added.

They said current workers would not get raises over the three years of the contract. But employees would get two lump-sum payments, the sources said.

This round of negotiations began Feb. 11. At the table were federal mediator Peter J. Hurtgen and representatives of the UFCW, Albertsons Inc., Kroger Co., which owns Ralphs, and Safeway Inc., the parent of Vons and Pavilions.

In their statement, the supermarkets said they were “very pleased to have reached this agreement and at the prospect of seeing our employees return to work.” They said the proposed deal “squarely addresses the challenging healthcare costs and competitive issues we face.”

Hurtgen, calling it “one of the most difficult negotiations of my career,” declined to discuss the tentative pact. In a statement, he praised all the parties and said that “both sides had to face up to some hard choices and find a way to compromise but still achieve their essential goals.”

If ratified, the contract will cover the union members who went on strike or were locked out and the 11,000 people who work for regional chains, such as Stater Bros., that weren’t involved. Tens of thousands of replacement workers hired by Vons, Pavilions, Ralphs and Albertsons would lose their jobs.

Experts debated whether either side came away with a solid victory. But consumers would be winners.

“What we are anticipating is a price war of unprecedented proportions starting next month,” as stores hustle to woo shoppers who have shunned stores with picket lines, said Burt Flickinger III, director of Strategic Resource Group in New York. And Stater Bros. and other regional markets that have enjoyed a strike-spurred windfall of business also probably would cut prices to retain the customers they’ve gained.

The question of how much employers should subsidize workers’ healthcare coverage, and how much workers themselves should pay, made the dispute a centerpiece in the debate over employee healthcare insurance. For decades, people who worked for the big grocery chains in Central and Southern California paid no premiums for their coverage; the companies picked up the tab.

With medical costs rising -- and competitors like Wal-Mart and Target offering workers little or nothing in the way of healthcare benefits -- that became untenable for the grocery companies.

The main solution for the stores, it appears, is the two-tier system giving new hires less compensation. The employee turnover rate is relatively high in the grocery business, so those new, lower-paid hires could be in the majority within a few years.

This settlement will “definitely set a pattern” for other grocery negotiations around the country this year, said Charles Craver, a labor professor at George Washington University Law School. “What we are finally seeing in the service sector with these grocery companies is the same thing manufacturing is facing with jobs going abroad,” a relentless push to find the lowest operating costs.

Although many Americans pay for part of their health insurance, UFCW members fought hard against losing company-paid benefits, contending that they couldn’t afford it on their modest incomes. The average grocery worker’s annual income under the last contract was less than $30,000 a year, according to the union, and requiring them to buy part of their health insurance risked moving them into the ranks of the working poor.

Andrew Wolf, an analyst at investment firm BB&T; Capital Markets, said that though he didn’t know the settlement’s details, its broad outlines indicated “a small win for the companies.”

The two-tier system “is very valuable and can really help them get to a more level playing field against nonunion competitors,” he said.

But another analyst, Gary Giblen of CL King & Associates, said “anything less than the [union’s] total acceptance of the chains’ last offer is a defeat for the chains” because of the massive costs they incurred during the dispute.

“And their problems have just begun, because you’re going to have a massive price war to regain the business,” Giblen said.

The dispute exacted a stiff price from both sides. Workers faced serious hardships as they went months without a paycheck, subsisted on modest strike-fund pay that dwindled to as little as $100 a week and lost their company-paid health benefits Dec. 31.

Many found part-time jobs elsewhere to get by, and colleagues said some left the supermarket business for good. Others said they had to postpone needed medical care because they could not afford insurance.

In turn, the supermarket chains together suffered more than $1.5 billion in lost sales; Safeway alone was watching $7 million of business go elsewhere every day, one analyst said. The stores now face a tough fight to regain former customers and to productively reinstall a union workforce whose morale is soured by the bitter strike, analysts said.

Halloween was still nearly three weeks away when the dispute began, and the impasse by far was the longest in Southern California since World War II.

The latest work stoppage also was the longest in the relatively short history of the UFCW, a 1.4-million-member union created in 1979 by the merger of the retail clerks and meat cutters unions.

The UFCW struck Vons and Pavilions on Oct. 11. Albertsons and Ralphs were bargaining jointly with Safeway and locked out union workers the next day in a show of corporate solidarity.

Once underway, the strike and lockout revealed deeply entrenched positions on both sides that made the dispute so lengthy, highly charged and, at times, highly personal.

The supermarkets were determined to reduce their labor costs, and because they are multi-state giants with more than $35 billion in annual revenue each, they had the financial staying power for a long fight.

The UFCW was just as determined to keep as much of its members’ wages and health benefits as possible, and likewise drew a line in the sand in Southern California.

The union not only accused the chains of overstating the Wal-Mart concern, it claimed the markets were threatening to destroy one of the last U.S. jobs available that could provide middle-class comfort without requiring years of higher education.

Union officials and workers directed much of their anger at Steven Burd, the chief executive of Safeway, whom they viewed as the most stalwart in demanding lower wages and benefits. They constantly criticized him by name, and a caravan of protesters even drove to his house in the San Francisco Bay Area to hold a public protest.

Burd, unmoved, said he was willing to endure the strike as an investment in the chain’s long-term financial future. The other chains were just as resolute as Safeway, and they were supported by most Wall Street analysts and institutional holders of the companies’ stocks, whose prices held up relatively well during the long battle.

In the middle were millions of Southern Californians whose shopping habits were suddenly changed.

By and large they avoided the picketed stores and began shopping more frequently at smaller retailers such as Stater Bros. and Trader Joe’s. Starting in late October, the UFCW removed its pickets from Ralphs, saying it wanted to relieve consumers’ inconvenience by leaving one big chain picket-free.

But overall, the tactics of the seven UFCW locals were seen by many observers as lacking in force and cohesion in the face of the supermarkets’ steely resolve, thus contributing to the long impasse.

The union also came under assault, even from some of its own members, for failing to fully anticipate the supermarkets’ new labor agenda before the contract talks began. But some UFCW officials defended their efforts, pointing to the huge sales losses at the chains.

The supermarkets, meanwhile, had a controversial safety net. Before the strike, they agreed that if any of them reaped added business because of the dispute, it would share that windfall with the two others when the strike ended.

That’s what happened. After the UFCW removed its pickets from Ralphs, many shoppers flocked back to Ralphs, and under the chains’ “mutual-aid” pact, Kroger is now obliged to share some of the added income with Safeway and Albertsons. The firms declined to disclose how much money was involved.

But the pact is under legal attack. State Atty. Gen. Bill Lockyer has sued the companies over the arrangement, alleging it violates federal antitrust laws. The stores deny any wrongdoing.

Just hours before the grocery strike was settled Thursday, presidential contender Sen. John F. Kerry joined a small throng of striking grocery workers on the picket line at a Vons market in Santa Monica, throwing his support behind their cause and describing them as heroes in their fight for access to affordable healthcare.

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Times staff writers Maria L. La Ganga and Debora Vrana contributed to this report.