Labor & Employment Law

Private Equity Firms, Our New Corporate Masters?

By Tula Connell

Workers returned Tuesday to the job at Stella D’oro Biscuit Co. in the Bronx after a judge ordered the company reinstate the 136 employees who had remained strong throughout a brutal 11-month strike. But before they could even walk through the doors, they were greeted with the anti-union response by the company’s private equity firm owners, the 21st century’s mutation of the robber barons: Brynwood Partners announced it would shut down operations in October. (”Private equity firms” is the euphemism those leveraged buyout corporations adopted after leveraged buyout got a bad name in the 1980s.)

Established more than 75 years ago, Stella D’oro is a nationally known maker of specialty baked goods and until recently was a family-owned business. But a series of corporate buyouts ultimately resulted in Brynwood’s 2006 purchase of the company. And a private equity firm’s only reason for existing is to make money-lots of it. Even robber barons ultimately had to ensure they had enough workers on the job because those companies made money by making things. Not so for today’s private equity firms. Closing shop and making off with the profits is what they do.

In fact, the Greenwich, Conn.-based Brynwood admitted as much to the union’s attorney, Louis Nikolaidis, according to Juan Gonzales at the New York Daily News.

“Last year, they told us upfront, because we’re a hedge fund, our investors expect a higher rate of return, and your members should expect a wage cut,” Nikolaidis says.

A National Labor Relations Board (NLRB) administrative law judge ordered the workers reinstated because the company refused to provide financial information justifying the 20 percent wage cuts, elimination of pensions and slashing of paid vacation days it demanded of the workers. The judge also found the company prematurely and illegally declared negotiations at an impasse, forcing workers to strike. In May, when workers made an offer to end the strike and return to work under the old contract, the company illegally insisted workers accept the concessions as a condition for returning.

The largely immigrant workforce, represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM) Local 50, survived on $100 a week from the union’s strike fund. Most had been on the job between 10 and 20 years, and all are skilled workers. Yet, according to the union notes, Byrnwood has said that

many Stella D’oro workers should be earning a minimum wage since “anyone can do their job.”

Local 50 President Joyce Alston predicted that Brynwood Partners will close the Bronx bakery and reopen at a new location, according to the Bureau of National Affairs (subscription required).

“Our intention is to stop them from closing the plant down,” Alston told BNA July 8.

Alston attributed Brynwood’s decision to close the Bronx bakery as “retaliation” for the ALJ’s decision. “If it’s not being vindictive, then put the company up for sale and let a viable company buy it” so workers can keep their jobs, she urged Brynwood.

The workers at Stella D’oro demonstrated extraordinary solidarity in the face of painful financial circumstances, with no workers crossing the picket line. They received ongoing backing from the area’s union movement and daily “beeps” from the above-ground unionized subway drivers. As Gonzales writes:

Once the strike started, management brought in replacement workers, unilaterally instituted the cuts and offered jobs at the lower wages to any employee who crossed the line.

“They wanted to take us back to the dark ages,” said Mike Filippou, a bear-sized maintenance mechanic and a leader of the strike. “We told them, we weren’t going there.”

Not a single union member took up the company’s offer.

Local 50 says it will fight Stella D’oro’s decision to close the plant and soon file retaliation charges against the company with the NLRB.

Two lessons here: America’s workers desperately need labor law reform. The seating of Sen. Al Franken, who’s first act as senator was to co-sponsor the Employee Free Choice Act, is a significant move toward passage of the bill.

Second lesson: The United States needs to return to an economy that makes its money by making things. Kevin Phillips, author, warned in early 2006 that the nation was heading for big trouble because the financial services sector had overtaken the production sector. Phillips wrote that America’s turn toward an economy based on financial services?insurance, banking, investment, credit?was the way Great Britain evolved toward the middle of the 20th century.

And then the bottom fell out and the sun set on the British empire.

This is a cross-post from the Firedoglake blog.

Full post as published by AFL-CIO NOW BLOG on July 10, 2009 (boomark / email).