Is Kroger justified in closing stores over a hero pay ordinance?
Photo: Kroger

Kroger has announced that it will close a Ralphs and a Food 4 Less store in Long Beach, CA, after the city passed an ordinance requiring it to pay an extra $4 an hour to frontline associates for at least 120 days.

The grocer said it was forced into taking this action at the locations because they were underperforming prior to passage of the ordinance and would not be viable with a higher payroll. The two stores represent about a quarter of Kroger-owned locations in Long Beach.

Kroger criticized the ordinance as imbalanced, contending that some grocers must pay workers the additional $4 an hour more while others not. The law applies to stores with 15 employees or more that are part of larger businesses with 300 or more employees. Kroger also pointed out that, while Long Beach is requiring the company to pay its frontline workers more, it does not apply the same rule to city employees paid by the hour that are at risk as well.

The California Grocers Association, which filed a suit against Long Beach, claiming the ordinance interferes with collective bargaining, said that its passage will raise labor costs at grocery stores by about 28 percent, according to the Long Beach Post.

Long Beach is not alone in considering so-called “Hero Pay” resolutions. Other towns in California and other states are moving close to passing similar ordinances, all of which point to the increased risk that hourly, mostly low paid frontline workers, face in grocery store environments.

A study published last October in the journal Occupational and Environmental Medicine found that grocery workers in shopper-facing positions were 5.1 times more likely to be infected with COVID-19 than those who did not interact with customers. About 20 percent of those studied were infected and 76 percent of those were asymptomatic.

A recent Wall Street Journal article told a sobering story of Joyce Babineau, a 67-year-old Stop & Shop associate from Massachusetts. Ms. Babineau, who took great pains to avoid bringing COVID-19 into her home and infecting her 76-year-old husband Paul, believes she contacted the virus while at work. She was asymptomatic and Mr. Babineau, who suffered from chronic obstructive pulmonary disease, became ill and died.

BrainTrust

“This will come back to haunt Kroger. It’s called being penny wise and pound foolish. What terrible timing!”

Paula Rosenblum

Co-founder, RSR Research


“Again, this is arbitrary and in spite of populist anger, Kroger doesn’t deserve the black eye.”

Bob Phibbs

President/CEO, The Retail Doctor


“This is populist without an understanding of how a $4 increase makes a very large impact on payroll on a percentage basis.”

Karen Wong

Co-Founder & CEO, TakuLabs Ltd.

Discussion Questions

DISCUSSION QUESTIONS: Do you see chains closing large numbers of stores if hero pay ordinances are passed in other cities and towns around the country? Will Kroger come out of the dispute over hero pay in Long Beach looking like the good or bad guy to its customers?

Poll

Will Kroger come out of the dispute over hero pay in Long Beach looking like the good or bad guy to locals and others outside the city?

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37 responses to “Is Kroger justified in closing stores over a hero pay ordinance?”

  1. Neil Saunders Avatar
    Neil Saunders

    Regardless of the economics, this isn’t a very good look for Kroger – especially in the middle of the pandemic. I also believe that front-line workers should be rewarded well for the risks they are taking during the pandemic. Trader Joe’s response of increasing pay for all workers is more convincing, although as a consequence they cancelled their usual mid-year pay increase.

    That said, I do not agree with councils passing pay ordinances. It is very easy to sit in a council chamber and vote through an increase that, ultimately, you don’t need to pay for. And each council doing different things creates a patchwork of pay rates that’s hard to manage and is unfair to workers in different parts of the country or state. I also have a moral objection to government becoming too involved in the running of private business and circumventing the usual bargaining processes.

    The Kroger store closures are a consequence. My understanding is that those shops were struggling before the pandemic but that the pay increases pushed them too far over the edge in terms of profitability. As I said, closing them is not a good look. But Kroger has a right to run its business as it sees fit and it’s a lesson to government that interference can come with consequences.

  2. Cathy Hotka Avatar
    Cathy Hotka

    “Hero pay” isn’t just an empty term; it describes additional compensation for people who literally risk their lives to keep food on the table as essential workers. By closing its doors over this issue, Kroger proudly embraces the role of Bad Guy. I’d like to see some top Kroger execs take on the role of front-line workers, at their pay, to see what it’s like.

  3. Paula Rosenblum Avatar
    Paula Rosenblum

    This will come back to haunt Kroger. It’s called being penny wise and pound foolish.

    What terrible timing!

    1. Cathy Hotka Avatar
      Cathy Hotka

      And the cost of closing a store easily dwarfs the pay increase. This is a stunt, and an unfortunate one.

      1. storewanderer Avatar
        storewanderer

        It is okay. Other grocers will go ahead and serve these customers. Kroger can spend money litigating this, paying store closure costs, lease exit costs or costs to maintain an empty building they own, etc. rather than just pay 120 days of extra payroll … perhaps they ran the numbers and they think they will come out ahead this way. I certainly would say that analysis is flawed, but I don’t know.

  4. Dr. Stephen Needel Avatar
    Dr. Stephen Needel

    Kroger should just say, “Okay, but we’re raising our prices to cover this forced labor increase and your government is the reason food costs more.” Put the blame where it belongs.

    1. Ben Ball Avatar
      Ben Ball

      I’d love to agree with you Stephen (and Gene Detroyer below) but the issue is that Kroger and other “major employers” would be forced to post higher price notices while other small local chains would not. That approach would only exacerbate the diminished competitiveness of the chains (perhaps a sub-plot to the Long Beach City Council’s decision anyway for some?).

      1. storewanderer Avatar
        storewanderer

        The one thing I do take issue with here is Walmart and Target are not subject to this additional pay in Long Beach. That, I feel, is wrong and they should be subject to it (and Costco). I believe the Los Angeles ordinance will subject the big-box retailers to additional pay per hour like the grocers.

        It is a 300 employee cutoff (total) to be subject to the additional pay in Long Beach. I am guessing there must be some independent grocery stores there, but many of the small chains in the market will be subject to this as well as they absolutely have over 300 employees.

  5. Richard Hernandez Avatar
    Richard Hernandez

    I see Kroger leadership on TV commercials saying they care about their employees and want customers to continue to shop in their stores. This is definitely NOT a good look for Kroger when they are portraying something different. I hope this doesn’t become an M.O. for Kroger.

  6. Karen Wong Avatar
    Karen Wong

    I 100 percent agreed with Neil on this one. This is terrible optics during a pandemic. Others have handled this better or found ways to spread out the impact. But I don’t agree with ad hoc interference with wages, especially if it targets specific sectors. A time limit on these increases isn’t realistic IRL. It’s not reasonable to expect that people will be willing to take a decrease in pay once they’ve adjusted to spending based on the increased pay. It’s proven out again and again. We saw it when others rolled back hero pay. This is populist without an understanding of how a $4 increase makes a very large impact on payroll on a percentage basis.

  7. Chuck Ehredt Avatar
    Chuck Ehredt

    I´m sure there is a bigger story here and Kroger’s decision may be convenient to stem losses at those stores, but more importantly is a signal that they will act if similar legislation gets implemented (unfairly) in other regions. This decision may lead to bad PR in the short-term, but has huge ramifications over many years across the entire business. It is hard to speculate on what is the right information without knowing the details, but I chalk this up to playing out a longer and bigger poker game.

    1. storewanderer Avatar
      storewanderer

      Competitors will keep their stores open and just increase prices to make up for the added overhead cost of the 120 day mandated labor rate increase. Perhaps you cut staffing levels and close or scale back money losing labor intensive departments (bakery, seafood, parts of deli, who knows) at the same time to make up for this. Not a great solution — increasing prices is probably the best solution.

  8. Harley Feldman Avatar
    Harley Feldman

    The problem with the Long Beach ordinance is that it treats different stores differently. Kroger, because of its size and number of employees receives a $4 per hour penalty to compete in the marketplace for store employees. While it is not a good look for Kroger, they are making a statement about the unfairness of the new policy. I suspect Kroger would do the same thing in other cities and towns where the hero pay ordinances were applied just as unfairly. On the other hand, their customers will not like them keeping the stores open and potentially raising prices to cover the new hero pay cost either. Many of their customers will support the idea of being fair in the imposition of hero pay.

  9. Gene Detroyer Avatar
    Gene Detroyer

    Maybe I am overreacting more than I should. This disgusts me.

    The solution is simple. Put signage up that your are raising prices and why. Let your customers vote with their wallets.

    We are not talking about major price increases — a nickel here, a dime there.

    I suspect that just the announcement will send many customers to their competitors, and the reason won’t be price.

  10. Jeff Weidauer Avatar
    Jeff Weidauer

    A company of Kroger’s size and scale should have a better handle on the optics of its actions. Whether or not its actions are justified from an economic perspective, the sound bite of “Kroger closing stores to avoid hero pay” will cost the company dearly for years to come.

  11. Bob Phibbs Avatar
    Bob Phibbs

    I lived in Long Beach and am well aware of those two stores in challenging neighborhoods. I think the city is out of bounds here. Why $4? Why 120 days? Why now? Sorry but this seems arbitrary at best. The optics for the city are not good here. Los Angeles too is looking at mandating this, then I’m sure every other business.

    There’s a reason this law is being challenged in court by the California Grocers Association. The cascade of local ordinances around hazard pay in Seattle and several California cities is “just the beginning,” UFCW International President Marc Perrone said in a statement. It’s a backdoor way to raise minimum pay and I think it will backfire as businesses balk.

    1. Ben Ball Avatar
      Ben Ball

      Agreed Bob. Unions are losing effectiveness with both employers and workers, so they are resorting to local governments under the PR cover of the pandemic and the justly earned label of “front-line worker” which ALL retail workers assumed during this time — not just grocery. Kroger will wear the media egg on their faces for a while, but this battle needs to be fought.

      1. Bob Phibbs Avatar
        Bob Phibbs

        Yeah I just don’t see the endgame. We got it for 120 days, we can make them give it to us all the time. BTW this is $4 on top of whatever union wages they are getting so it potentially goes much higher than minimum wage.

      2. Ben Ball Avatar
        Ben Ball

        Apologies for turning this into a running commentary Bob. But it’s worth noting that I come from a union family. My dad was a union member (and steward for a time) in a NC textile mill in the ’50s. He quit in the ’70s. Later he told me “son, I joined the union when they fought for a man’s right to work. I quit the union when they started fighting to keep us from having to work very hard.”

      3. Bob Phibbs Avatar
        Bob Phibbs

        My mom was in the teacher’s union for 50 years and I have many relatives in unions as well.

  12. Steve Montgomery Avatar
    Steve Montgomery

    There is the financial reality and the optics that Kroger has to address with these locations. If the stores were underperforming and at best marginally profitable, they may have faced closing at some point. As the pandemic has done for some, many things that mandated extra pay accelerated the timetable for their closure. That is the financial reality.

    The optics are that for a major chain to close two locations in one community that mandated extra pay for essential workers is not good. Will it make them look like good guys? Never going to happen. Closing a store anytime does not make a retailer look good. People may understand the closure but at the very best they will be neutral.

    1. Bob Phibbs Avatar
      Bob Phibbs

      They have until April to work something out. These stores have been turned over prior because they didn’t make money. If/when they close those marginalized communities will have less access to food.

  13. Rich Duprey Avatar
    Rich Duprey

    “Hero pay” is an absurd term, as it’s a word thrown around way too easily. Sorry, but it’s not heroic what they’re doing and that demeans those who truly go above and beyond.

    As for the issue, it’s easy to demand businesses pay extra money, but grocery stores already operate on razor thin margins. Kroger made the right choice, unfortunately for their employees, they have politicians who prefer grandstanding.

  14. Jack Flanagan Avatar
    Jack Flanagan

    Perhaps these municipalities could consider absorbing a portion of these government-mandated increases by, say, reducing other government mandated costs such as the affected stores’ property taxes.

  15. Scott Norris Avatar
    Scott Norris

    And now Los Angeles is moving forward with a similar plan. So will Kroger pitch a fit and close a few stores there, too? Retreat to Orange County? No. That they are keeping most of their stores in Long Beach open but just closing two in economically challenged neighborhoods is the tell that it isn’t about the extra pay at all — they could have blamed Amazon, accelerating distribution and trucking costs, home delivery charges, or a dozen other things. This just gave them what they thought would be populist cover, and they totally read the room wrong. Now competitors have a big club to hit them with.

    1. Martin G Ramirez Avatar
      Martin G Ramirez

      The Los Coyotes location is right in the middle of $800K+ homes. Nowhere near lower income. It has been rumored for years that it was closing down.

      The hero pay has nothing to do with it closing.

  16. Bob Phibbs Avatar
    Bob Phibbs

    I couldn’t let this go and researched in the WaPost just now where I found this: “The Long Beach policy is in place for 120 days and includes groceries that sell at least 70 percent food products and employ more than 300 people nationally with at least 15 employees per store. Under those terms, it may exclude retailers like Target and Walmart.” Again, this is arbitrary and in spite of populist anger, Kroger doesn’t deserve the black eye.

    1. George Anderson Avatar
      George Anderson

      Kroger’s opposition to the ordinance is based on facts that demonstrate the inconsistencies/deficiencies of the Long Beach ordinance.

      The real question is how it will play in the court of public opinion. Perception, as we all know, is often a replacement for reality. That doesn’t seem as though it will play well for Kroger in this instance although I could be wrong. Closing stores in any community that is largely lower income and populated by minorities is not a great look for a retail brand at this time (there’s that perception thing again).

      I hope A) that something can be worked out so members of those areas will still have good options for getting their groceries and B) that Kroger finds a way to address its grievance with the local government without talking past its customers in this case.

      There’s no doubt that store associates will be losers as these locations shut. The stores’ customers will be right there with them.

      1. Bob Phibbs Avatar
        Bob Phibbs

        Agreed George. But the cynical side of me says proponents intentionally used the words “hero pay” in an effort to build support.

  17. Craig Sundstrom Avatar
    Craig Sundstrom

    I chose “no change” but that’s a little misleading: I think it will harden existing attitudes (liberals will decry “greedy Kroger” while conservatives will decry the “meddlesome” LB City Council).

    As I pointed out in the Target (Minneapolis) reopening, operating money-losing stores is an unseen — and thus under appreciated — form of philanthropy (IMHO far more meaningful than taking out ads or issuing PR statements about how well intentioned you are). How far that should go is open for debate, as is the legality of such measures.

    All that having been said, I think Kroger lost the first round of the battle, the “optics” one.

  18. James Tenser Avatar
    James Tenser

    My first reaction when I heard this story was sadness. The City of Long Beach seems not to have thought through all the consequences of its ordinance. Kroger’s announcement feels like grandstanding. Store employees are caught in the crossfire.

    Kroger evidently has used this news event as cover for the closure of two poor-performing locations. Not its finest moment.

    The additional pay proposed in Long Beach adds up to $2,743 per FTE over four months. Is that enough hazard pay to compensate an employee who contracts the COVID-19 virus in the workplace?

    1. Bob Phibbs Avatar
      Bob Phibbs

      I don’t agree with the whole “hazard pay” or “hero pay” calculated wording of the ordinance. Why not say anyone who pumped gas, worked in a hardware store or doctor’s office should get an additional $4? This was intended to be the spark of a new labor movement and I don’t think it will hold up in court. Especially when Target and Walmart are exempt.

      1. James Tenser Avatar
        James Tenser

        Note that I avoided “hero” and could have substituted “extra” for “hazard” in my comment, Bob. You observe correctly that words are chosen for their emotional/political impact. I exert myself to be thoughtful about that in this forum, as I believe you do. Seems to me the LB City Council would have benefitted from better counsel.

  19. Richard J. George, Ph.D. Avatar
    Richard J. George, Ph.D.

    Slippery PR slope that Kroger is on. Lots of potential negativity, not to mention the blowback from customers, whose stores have closed. Understand the financial arguments, but this issue is as much about emotions of the workers and customers as it is about the numbers.

  20. dbsfla2003 Avatar
    dbsfla2003

    So let me get this right, a company with revenue in excess of 280 billion dollars and net operating cash flow of over 8 billion in 2020, according to financial statements, is closing stores because of “hero pay” of $4 per employee. Correct?

    And your complaints about this are?

    Should any company make 8 billion dollars in net operating cash flow and complain about “hero pay” to front-line workers in the middle of a pandemic that has killed over 450,000 Americans?

    If you would answer differently, I would hope you are also working the “front-lines” during this pandemic, risking your and your families’ lives to SERVE the public, while your corporate owners are running the company from the safety of their own homes!

  21. storewanderer Avatar
    storewanderer

    Terrible move and terrible PR. Close stores for good over a 120 day mandated pay increase?

    Meanwhile Trader Joe’s announced $4/hr pay increase to employees chain-wide yesterday, in an afford to get ahead of these types of ordinances. In the west regional grocers such as Stater and Save Mart have been paying extra $2-$3/hr hero pay through 2020 and into January 2021 (I’m not sure if they are still paying it).

    Whether or not it is within the City Council’s right to do this is a topic for a courtroom and some political message board somewhere. But I will say this — had these chains kept the $2/hr hero pay from the middle of 2020, I doubt these City Councils would be imposing this. Now the chains will spend a lot of time and money litigating this matter (and paying whatever arbitrary increase in wage the local city council dictates) when they could have just done the right thing for their employees and paid them the higher wage through this whole period.

    Even if you were going to close the stores due to poor performance, this is just awful form to blame it on this 120 day mandated pay increase. Close an established 30+ year business over a temporary 120 day pay increase? Not only the impact on the customers and employees of these stores but also the surrounding shopping centers/small businesses.

    Seems to come from the same mindset that had certain Kroger divisions stop accepting Visa Credit Cards for a number of months in 2019 to protest high fees, while at the same time they accepted other credit card types that are known to have a much higher processing fee than Visa, and then mysteriously started to accept the Visa Cards again right before the holidays (probably couldn’t afford the loss of revenue during the holiday period that policy would have caused).

    For me this leaves an awful taste in my mouth. It is anti customer, anti employee, and just poor form.

  22. Martin G Ramirez Avatar
    Martin G Ramirez

    Hi, I live in Long Beach and have lived here for over 50 years.

    The Los Coyotes location has been rumored to be closing for many years. It is within a mile of a Stater Brothers, Pavilions and Walmart Super Center. Supposedly it is going to be redeveloped for housing. It is smack in the middle of upper middle class homes, 800k and up.

    I don’t know much about the other location except that it was long struggling as well.

    What is making residents angry is that Kroger is blaming the hero pay ordinance.

    If that were true, why didn’t they close the other four locations that they have in Long Beach?

37 Comments
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Neil Saunders
Neil Saunders
Noble Member
2 years ago

Regardless of the economics, this isn’t a very good look for Kroger – especially in the middle of the pandemic. I also believe that front-line workers should be rewarded well for the risks they are taking during the pandemic. Trader Joe’s response of increasing pay for all workers is more convincing, although as a consequence they cancelled their usual mid-year pay increase.

That said, I do not agree with councils passing pay ordinances. It is very easy to sit in a council chamber and vote through an increase that, ultimately, you don’t need to pay for. And each council doing different things creates a patchwork of pay rates that’s hard to manage and is unfair to workers in different parts of the country or state. I also have a moral objection to government becoming too involved in the running of private business and circumventing the usual bargaining processes.

The Kroger store closures are a consequence. My understanding is that those shops were struggling before the pandemic but that the pay increases pushed them too far over the edge in terms of profitability. As I said, closing them is not a good look. But Kroger has a right to run its business as it sees fit and it’s a lesson to government that interference can come with consequences.

25
Cathy Hotka
Cathy Hotka
Active Member
2 years ago

“Hero pay” isn’t just an empty term; it describes additional compensation for people who literally risk their lives to keep food on the table as essential workers. By closing its doors over this issue, Kroger proudly embraces the role of Bad Guy. I’d like to see some top Kroger execs take on the role of front-line workers, at their pay, to see what it’s like.

-4
Paula Rosenblum
Paula Rosenblum
Active Member
2 years ago

This will come back to haunt Kroger. It’s called being penny wise and pound foolish.

What terrible timing!

-5
Cathy Hotka
Cathy Hotka
Active Member
Reply to  Paula Rosenblum
2 years ago

And the cost of closing a store easily dwarfs the pay increase. This is a stunt, and an unfortunate one.

-11
storewanderer
storewanderer
Member
Reply to  Cathy Hotka
2 years ago

It is okay. Other grocers will go ahead and serve these customers. Kroger can spend money litigating this, paying store closure costs, lease exit costs or costs to maintain an empty building they own, etc. rather than just pay 120 days of extra payroll … perhaps they ran the numbers and they think they will come out ahead this way. I certainly would say that analysis is flawed, but I don’t know.

-2
Dr. Stephen Needel
Dr. Stephen Needel
Member
2 years ago

Kroger should just say, “Okay, but we’re raising our prices to cover this forced labor increase and your government is the reason food costs more.” Put the blame where it belongs.

8
Ben Ball
Ben Ball
Member
Reply to  Dr. Stephen Needel
2 years ago

I’d love to agree with you Stephen (and Gene Detroyer below) but the issue is that Kroger and other “major employers” would be forced to post higher price notices while other small local chains would not. That approach would only exacerbate the diminished competitiveness of the chains (perhaps a sub-plot to the Long Beach City Council’s decision anyway for some?).

4
storewanderer
storewanderer
Member
Reply to  Ben Ball
2 years ago

The one thing I do take issue with here is Walmart and Target are not subject to this additional pay in Long Beach. That, I feel, is wrong and they should be subject to it (and Costco). I believe the Los Angeles ordinance will subject the big-box retailers to additional pay per hour like the grocers.

It is a 300 employee cutoff (total) to be subject to the additional pay in Long Beach. I am guessing there must be some independent grocery stores there, but many of the small chains in the market will be subject to this as well as they absolutely have over 300 employees.

5
Richard Hernandez
Richard Hernandez
Member
2 years ago

I see Kroger leadership on TV commercials saying they care about their employees and want customers to continue to shop in their stores. This is definitely NOT a good look for Kroger when they are portraying something different. I hope this doesn’t become an M.O. for Kroger.

-4
Karen Wong
Karen Wong
2 years ago

I 100 percent agreed with Neil on this one. This is terrible optics during a pandemic. Others have handled this better or found ways to spread out the impact. But I don’t agree with ad hoc interference with wages, especially if it targets specific sectors. A time limit on these increases isn’t realistic IRL. It’s not reasonable to expect that people will be willing to take a decrease in pay once they’ve adjusted to spending based on the increased pay. It’s proven out again and again. We saw it when others rolled back hero pay. This is populist without an understanding of how a $4 increase makes a very large impact on payroll on a percentage basis.

14
Chuck Ehredt
Chuck Ehredt
Member
2 years ago

I´m sure there is a bigger story here and Kroger’s decision may be convenient to stem losses at those stores, but more importantly is a signal that they will act if similar legislation gets implemented (unfairly) in other regions. This decision may lead to bad PR in the short-term, but has huge ramifications over many years across the entire business. It is hard to speculate on what is the right information without knowing the details, but I chalk this up to playing out a longer and bigger poker game.

16
storewanderer
storewanderer
Member
Reply to  Chuck Ehredt
2 years ago

Competitors will keep their stores open and just increase prices to make up for the added overhead cost of the 120 day mandated labor rate increase. Perhaps you cut staffing levels and close or scale back money losing labor intensive departments (bakery, seafood, parts of deli, who knows) at the same time to make up for this. Not a great solution — increasing prices is probably the best solution.

1
Harley Feldman
Harley Feldman
2 years ago

The problem with the Long Beach ordinance is that it treats different stores differently. Kroger, because of its size and number of employees receives a $4 per hour penalty to compete in the marketplace for store employees. While it is not a good look for Kroger, they are making a statement about the unfairness of the new policy. I suspect Kroger would do the same thing in other cities and towns where the hero pay ordinances were applied just as unfairly. On the other hand, their customers will not like them keeping the stores open and potentially raising prices to cover the new hero pay cost either. Many of their customers will support the idea of being fair in the imposition of hero pay.

16
Gene Detroyer
Gene Detroyer
Trusted Member
2 years ago

Maybe I am overreacting more than I should. This disgusts me.

The solution is simple. Put signage up that your are raising prices and why. Let your customers vote with their wallets.

We are not talking about major price increases — a nickel here, a dime there.

I suspect that just the announcement will send many customers to their competitors, and the reason won’t be price.

-5
Jeff Weidauer
Jeff Weidauer
Member
2 years ago

A company of Kroger’s size and scale should have a better handle on the optics of its actions. Whether or not its actions are justified from an economic perspective, the sound bite of “Kroger closing stores to avoid hero pay” will cost the company dearly for years to come.

-4
Bob Phibbs
Bob Phibbs
Active Member
2 years ago

I lived in Long Beach and am well aware of those two stores in challenging neighborhoods. I think the city is out of bounds here. Why $4? Why 120 days? Why now? Sorry but this seems arbitrary at best. The optics for the city are not good here. Los Angeles too is looking at mandating this, then I’m sure every other business.

There’s a reason this law is being challenged in court by the California Grocers Association. The cascade of local ordinances around hazard pay in Seattle and several California cities is “just the beginning,” UFCW International President Marc Perrone said in a statement. It’s a backdoor way to raise minimum pay and I think it will backfire as businesses balk.

20
Ben Ball
Ben Ball
Member
Reply to  Bob Phibbs
2 years ago

Agreed Bob. Unions are losing effectiveness with both employers and workers, so they are resorting to local governments under the PR cover of the pandemic and the justly earned label of “front-line worker” which ALL retail workers assumed during this time — not just grocery. Kroger will wear the media egg on their faces for a while, but this battle needs to be fought.

16
Bob Phibbs
Bob Phibbs
Active Member
Reply to  Ben Ball
2 years ago

Yeah I just don’t see the endgame. We got it for 120 days, we can make them give it to us all the time. BTW this is $4 on top of whatever union wages they are getting so it potentially goes much higher than minimum wage.

10
Ben Ball
Ben Ball
Member
Reply to  Bob Phibbs
2 years ago

Apologies for turning this into a running commentary Bob. But it’s worth noting that I come from a union family. My dad was a union member (and steward for a time) in a NC textile mill in the ’50s. He quit in the ’70s. Later he told me “son, I joined the union when they fought for a man’s right to work. I quit the union when they started fighting to keep us from having to work very hard.”

8
Bob Phibbs
Bob Phibbs
Active Member
Reply to  Ben Ball
2 years ago

My mom was in the teacher’s union for 50 years and I have many relatives in unions as well.

-1
Steve Montgomery
Steve Montgomery
Member
2 years ago

There is the financial reality and the optics that Kroger has to address with these locations. If the stores were underperforming and at best marginally profitable, they may have faced closing at some point. As the pandemic has done for some, many things that mandated extra pay accelerated the timetable for their closure. That is the financial reality.

The optics are that for a major chain to close two locations in one community that mandated extra pay for essential workers is not good. Will it make them look like good guys? Never going to happen. Closing a store anytime does not make a retailer look good. People may understand the closure but at the very best they will be neutral.

2
Bob Phibbs
Bob Phibbs
Active Member
Reply to  Steve Montgomery
2 years ago

They have until April to work something out. These stores have been turned over prior because they didn’t make money. If/when they close those marginalized communities will have less access to food.

3
Rich Duprey
Rich Duprey
2 years ago

“Hero pay” is an absurd term, as it’s a word thrown around way too easily. Sorry, but it’s not heroic what they’re doing and that demeans those who truly go above and beyond.

As for the issue, it’s easy to demand businesses pay extra money, but grocery stores already operate on razor thin margins. Kroger made the right choice, unfortunately for their employees, they have politicians who prefer grandstanding.

9
Jack Flanagan
Jack Flanagan
2 years ago

Perhaps these municipalities could consider absorbing a portion of these government-mandated increases by, say, reducing other government mandated costs such as the affected stores’ property taxes.

8
Scott Norris
Scott Norris
Member
2 years ago

And now Los Angeles is moving forward with a similar plan. So will Kroger pitch a fit and close a few stores there, too? Retreat to Orange County? No. That they are keeping most of their stores in Long Beach open but just closing two in economically challenged neighborhoods is the tell that it isn’t about the extra pay at all — they could have blamed Amazon, accelerating distribution and trucking costs, home delivery charges, or a dozen other things. This just gave them what they thought would be populist cover, and they totally read the room wrong. Now competitors have a big club to hit them with.

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Martin G Ramirez
Martin G Ramirez
Reply to  Scott Norris
2 years ago

The Los Coyotes location is right in the middle of $800K+ homes. Nowhere near lower income. It has been rumored for years that it was closing down.

The hero pay has nothing to do with it closing.

0
Bob Phibbs
Bob Phibbs
Active Member
2 years ago

I couldn’t let this go and researched in the WaPost just now where I found this: “The Long Beach policy is in place for 120 days and includes groceries that sell at least 70 percent food products and employ more than 300 people nationally with at least 15 employees per store. Under those terms, it may exclude retailers like Target and Walmart.” Again, this is arbitrary and in spite of populist anger, Kroger doesn’t deserve the black eye.

5
George Anderson
George Anderson
Member
Reply to  Bob Phibbs
2 years ago

Kroger’s opposition to the ordinance is based on facts that demonstrate the inconsistencies/deficiencies of the Long Beach ordinance.

The real question is how it will play in the court of public opinion. Perception, as we all know, is often a replacement for reality. That doesn’t seem as though it will play well for Kroger in this instance although I could be wrong. Closing stores in any community that is largely lower income and populated by minorities is not a great look for a retail brand at this time (there’s that perception thing again).

I hope A) that something can be worked out so members of those areas will still have good options for getting their groceries and B) that Kroger finds a way to address its grievance with the local government without talking past its customers in this case.

There’s no doubt that store associates will be losers as these locations shut. The stores’ customers will be right there with them.

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Bob Phibbs
Bob Phibbs
Active Member
Reply to  George Anderson
2 years ago

Agreed George. But the cynical side of me says proponents intentionally used the words “hero pay” in an effort to build support.

6
Craig Sundstrom
Craig Sundstrom
Active Member
2 years ago

I chose “no change” but that’s a little misleading: I think it will harden existing attitudes (liberals will decry “greedy Kroger” while conservatives will decry the “meddlesome” LB City Council).

As I pointed out in the Target (Minneapolis) reopening, operating money-losing stores is an unseen — and thus under appreciated — form of philanthropy (IMHO far more meaningful than taking out ads or issuing PR statements about how well intentioned you are). How far that should go is open for debate, as is the legality of such measures.

All that having been said, I think Kroger lost the first round of the battle, the “optics” one.

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James Tenser
James Tenser
Member
2 years ago

My first reaction when I heard this story was sadness. The City of Long Beach seems not to have thought through all the consequences of its ordinance. Kroger’s announcement feels like grandstanding. Store employees are caught in the crossfire.

Kroger evidently has used this news event as cover for the closure of two poor-performing locations. Not its finest moment.

The additional pay proposed in Long Beach adds up to $2,743 per FTE over four months. Is that enough hazard pay to compensate an employee who contracts the COVID-19 virus in the workplace?

1
Bob Phibbs
Bob Phibbs
Active Member
Reply to  James Tenser
2 years ago

I don’t agree with the whole “hazard pay” or “hero pay” calculated wording of the ordinance. Why not say anyone who pumped gas, worked in a hardware store or doctor’s office should get an additional $4? This was intended to be the spark of a new labor movement and I don’t think it will hold up in court. Especially when Target and Walmart are exempt.

6
James Tenser
James Tenser
Member
Reply to  Bob Phibbs
2 years ago

Note that I avoided “hero” and could have substituted “extra” for “hazard” in my comment, Bob. You observe correctly that words are chosen for their emotional/political impact. I exert myself to be thoughtful about that in this forum, as I believe you do. Seems to me the LB City Council would have benefitted from better counsel.

5
Richard J. George, Ph.D.
Richard J. George, Ph.D.
Member
2 years ago

Slippery PR slope that Kroger is on. Lots of potential negativity, not to mention the blowback from customers, whose stores have closed. Understand the financial arguments, but this issue is as much about emotions of the workers and customers as it is about the numbers.

1
dbsfla2003
dbsfla2003
2 years ago

So let me get this right, a company with revenue in excess of 280 billion dollars and net operating cash flow of over 8 billion in 2020, according to financial statements, is closing stores because of “hero pay” of $4 per employee. Correct?

And your complaints about this are?

Should any company make 8 billion dollars in net operating cash flow and complain about “hero pay” to front-line workers in the middle of a pandemic that has killed over 450,000 Americans?

If you would answer differently, I would hope you are also working the “front-lines” during this pandemic, risking your and your families’ lives to SERVE the public, while your corporate owners are running the company from the safety of their own homes!

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storewanderer
storewanderer
Member
2 years ago

Terrible move and terrible PR. Close stores for good over a 120 day mandated pay increase?

Meanwhile Trader Joe’s announced $4/hr pay increase to employees chain-wide yesterday, in an afford to get ahead of these types of ordinances. In the west regional grocers such as Stater and Save Mart have been paying extra $2-$3/hr hero pay through 2020 and into January 2021 (I’m not sure if they are still paying it).

Whether or not it is within the City Council’s right to do this is a topic for a courtroom and some political message board somewhere. But I will say this — had these chains kept the $2/hr hero pay from the middle of 2020, I doubt these City Councils would be imposing this. Now the chains will spend a lot of time and money litigating this matter (and paying whatever arbitrary increase in wage the local city council dictates) when they could have just done the right thing for their employees and paid them the higher wage through this whole period.

Even if you were going to close the stores due to poor performance, this is just awful form to blame it on this 120 day mandated pay increase. Close an established 30+ year business over a temporary 120 day pay increase? Not only the impact on the customers and employees of these stores but also the surrounding shopping centers/small businesses.

Seems to come from the same mindset that had certain Kroger divisions stop accepting Visa Credit Cards for a number of months in 2019 to protest high fees, while at the same time they accepted other credit card types that are known to have a much higher processing fee than Visa, and then mysteriously started to accept the Visa Cards again right before the holidays (probably couldn’t afford the loss of revenue during the holiday period that policy would have caused).

For me this leaves an awful taste in my mouth. It is anti customer, anti employee, and just poor form.

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Martin G Ramirez
Martin G Ramirez
2 years ago

Hi, I live in Long Beach and have lived here for over 50 years.

The Los Coyotes location has been rumored to be closing for many years. It is within a mile of a Stater Brothers, Pavilions and Walmart Super Center. Supposedly it is going to be redeveloped for housing. It is smack in the middle of upper middle class homes, 800k and up.

I don’t know much about the other location except that it was long struggling as well.

What is making residents angry is that Kroger is blaming the hero pay ordinance.

If that were true, why didn’t they close the other four locations that they have in Long Beach?

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