Federal Grand Jury Indicts Ralphs
By George Anderson
A federal grand jury has handed down an indictment of Ralphs Grocery Co. charging the company illegally rehired nearly 1,000 employees during the grocery workers lockout/strike two years ago.
According to prosecutors in the case, Ralphs rehired union members using fake names and Social Security numbers. One regional manager with the chain is alleged to have asked a store manager in La Jolla to recruit workers before the labor action started to have them serve as a “roving crew” to work at other Ralphs’ locations.
The actions, said U.S. Attorney Debra Wong Yang, represented a “tacit approval, if not encouragement by management” for stores to engage in illegal hiring activities.
“Because Ralphs had seasoned workers, not untrained temporary replacements, it was able to operate much more efficiently and profitably,” said Ms. Wong Yang. “As a result, Ralphs was able to extend the labor dispute to the distinct detriment of the union, which by the end of the lockout had exhausted its financial resources.”
Ralphs and its parent company Kroger disagree with the prosecutor’s charges.
“We strongly dispute the claim that the behavior of some store managers reflected a corporate plan devised to further the company’s position during the prolonged labor negotiations,” said Paul Heldman, Kroger’s senior vice president. “The federal prosecutors simply have this wrong. Ralphs hired more than 50,000 temporary workers during the strike, and we believe less than 1 percent, or about 200, of them were locked-out employees who were rehired unlawfully. We regret that misconduct, but it had no effect whatsoever on the duration or outcome of the labor dispute.”
Moderator’s Comment: Will the indictment of Ralphs for illegally rehiring workers during the Southern California grocery workers lockout/strike have
an impact on how the chain is perceived by the public or its bottom line performance? –
George Anderson – Moderator
No impact whatsoever. David Livingston is absolutely right. How have charges of hiring illegals affected Wal-Mart? Who can measure it? Ralphs gets points from me for enduring the strike as well as they did. If, as they claim, less than one percent of their temporary workers turned out to be locked-out union members, my hat’s off to them. I wonder if the other chains involved can make the same claim.
I don’t think anybody cares. Customers want service. Why should they care about whose Social Security number is on a job application? Our government has no business sticking their nose into petty union politics.
It’s hard to explain how 200 people were hired with fake Social Security numbers. If this happened with 2 people, or happened at only 1 store, top management would have greater defense credibility. They hired thousands, and it’s possible a few were frauds, but it’s hard to explain the lack of controls. When a company is caught up in a labor dispute, the stress can be awful, and behavior on all sides can become bizarre. All behavior, constructive or not, has repercussions. Everyone has to be prepared to pay the price for, or gain the benefit of, their actions. Profitable supermarkets have paper-thin margins, when all expenses are considered. Losing even a tiny portion of the customer base makes profitability much more difficult. Ralphs needs major PR surgery.
The success of an organization is based not only on how customers perceive a company’s products and services, but how they perceive their corporate reputation as well. In an industry like the retail trade where many products are completely commoditized, how a company is seen through the eyes of their customers, employees, vendors, the media, community leaders and government officials can have real and lasting impact on their success, or lack thereof.
If customers and other stakeholders perceive Ralphs as taking advantage of their workers by “extending the labor dispute to the distinct detriment of the union, which by the end of the lockout had exhausted its financial resources,” they will show their displeasure where it hurts Ralphs the most… at the checkout counter.
Companies need to realize that how customers and other stakeholders view a company is based on their perceptions of what is right or wrong, not what is “legal” or “illegal.” Did Ralphs put the needs of the few before the rights of the many? Did they put profits before ethics? Did they concentrate on a short term gain instead of looking at the long term impact? Whether they actually did what the U.S. Attorney’s office said they did is now of little concern. As was learned by the Exxon folks, it can take 10 minutes to destroy a reputation that will take seven years to rebuild.
I must disagree with Mr. Livingston. During the long strike, a significant number of Southern California grocery shoppers pointedly chose not to shop in the stores that locked out their union employees. While some of these shoppers may have belonged to a union themselves, others believed the grocery chains were being unfair to the employees. Fairness by businesses is very important to a good many consumers.
It has taken a very long time to get shoppers back into those stores that were involved in the strike. Safeway, whose Von’s stores were struck, reported financial losses from the strike long after it was over. If Ralphs/Kroger management is convicted of these charges, some Southern California consumers will choose to shop in other stores. And no retailer can afford to lose shoppers in today’s fiercely competitive environment.
I was going to let David Livingston’s comments alone until I re-read his last sentence – “Our government has no business sticking their nose into petty union politics.” With corporations defaulting on promises made to workers, whether related to healthcare benefits for the workers or their families, pension benefits, or continued medical benefits to retirees, government does have a role to ensure that both unions and business owners “play fair.”
According to a Bureau of Labor Statistic study, union employees are significantly more likely than non-union employees to have defined retirement plans, medical, dental, and vision health insurance, short and long term disability, paid vacation, paid holidays, and life insurance. With companies like Ralphs operating on razor thin margins, should we be surprised that companies might attempt to decrease the power of the unions that represent their workers in the hopes of securing more (business) favorable agreements? And would we not expect that our government has some responsibility to ensure the health and welfare of millions and millions of workers?
Again, the facts are not yet in, there are only allegations of wrongdoing from the government and denials of wrongdoing from the corporation. But to deny the government has some role in ensuring fair treatment between companies and their workers diminishes the important role unions have meant to all workers, union and non-union alike.
Oops, I’m about to agree with David again (must make a New Year’s resolution about that…). I don’t think customers could care less. The strike is old news, wrapping today’s fish & chips in jolly old England. People may not like the principle or suspecting that Ralphs didn’t act entirely ethically but, sticking with the fish analogy, there are bigger ones to fry in the day to day scale of things for individual consumers. While I endorse the legal action being taken to try and ensure that such behaviour isn’t repeated, I seriously doubt whether customers who like Ralphs will take their wallets elsewhere just because of this.
I think the impact on Ralphs could be significant. Depending on how much press it gets, how pervasive the practice appears to be and of course whether they are found guilty. Supermarkets have a unique relationship with their customers: they can kill them, or at least make them terribly sick. Especially when you start talking about fresh departments like meat, deli and fish, the store must be vary disciplined in how it handles the products. They must learn to follow approved procedures for handling and preparing the products. And then, they must be willing to take them off the shelf and dispose of them when they become outdated because the sales did not go according to plan. They must do this knowing full well that the discards directly impact their bottom line and possible their bonuses.
It sounds like at best this case will show a “don’t ask, don’t tell” attitude of Ralphs’ management. In the worse case it will prove active encouragement of the practices. In either case it does not speak well of having the necessary procedures and controls in place to monitor store operations.
This goes back to the “my store” concept. If you like the store, you shop there until they stop having the products, prices and services you want.
One has to wonder about the union re-hires. It sounds like they did not support the strike/lock-out in the first place. I would think they contributed to the exhaustion of financial resources to a large degree.
Southern California had better get ready for the 800 pound gorilla just entering the arena. Strikes, higher pay and benefits, more days off, etc are of little consequence if your store closes. Unless there is “something in the water” out there, many people will take lower prices every time, regardless of their union affiliation. Employees and management are going to have to face some hard realities like some of us already have.