The Washington PostDemocracy Dies in Darkness

Safeway workers prepare for strike vote as contract negotiations remain stalled

Activists attend a rally at a Safeway store in Washington on Feb. 19. (Alex Brandon/AP) (AP)
Placeholder while article actions load

The union representing more than 10,000 Safeway grocery store workers is moving closer to a strike that could disrupt operations at 116 D.C.-area locations, union representatives said Friday, as a disagreement with the company’s private equity-owned management over pensions remains unresolved.

United Food and Commercial Workers Local 400, which represents workers at Safeway and Giant stores in Washington, Maryland and Virginia, has been negotiating with Albertsons, a management company owned by the private equity firm Cerberus Capital Management, since September 2019. A temporary extension has been in place since the contract expired in October. A meeting between union and company representatives Friday did not resolve the dispute, and negotiations were expected to resume Monday, the union said.

To trigger a strike, a majority of Local 400 members would have to reject the company’s offer, and then two-thirds would have to vote to strike. The vote is scheduled for March 5, and a strike could begin the next day.

The pension dispute at Safeway is in many ways a microcosm of the broader retail industry, where automation, outsourcing and thinning profit margins have weakened the hand of organized labor. Pensions have been phased out across the business world as financial managers favor employee-managed 401(k) plans that entail fewer long-term liabilities for managers.

Grocery stores also face new competition as gas stations, drug stores and delivery services enter the market. Amazon opened its first cashier-less Amazon Go grocery store this week, marking the latest major foray into the industry by the online giant, which bought Whole Foods Market for $13.7 billion in 2017. (Amazon’s founder and chief executive, Jeff Bezos, owns The Washington Post.)

European discounters Aldi and Lidl also have expanded rapidly throughout the country, adding further pressure to traditional chains.

Private equity firms and hedge funds have been aggressively buying up supermarket chains since the mid-2000s, when a strong economy and low interest rates made leveraged buyouts attractive. They often used large chunks of debt to finance the deals, putting pressure on grocers as increased competition was cutting into sales.

Delivery workers say they're being squeezed by ever-changing algorithms

Local 400 officials say Cerberus, which bought Safeway in 2015, is offloading its financial responsibilities to take the company public.

“Since Cerberus has taken over Safeway, thousands of jobs have been lost at these stores," said Jonathan Williams, communications director for the Local 400.

“We think that has everything to do with the company’s brutal efforts to reduce its costs as it pursues this [initial public offering],” Williams said. "That’s why when you walk into Safeway these days you see emptier shelves, you see poorer customer service, and that’s the fault of the owner.”

Christine Wilcox, group vice president for communications at Albertsons, said any job losses at Safeway are due to “business decisions” to close under-performing stores in order to invest in new ones.

“It’s completely inaccurate to say that the reduction in the number of employees in Safeway’s Eastern division is related to anything other than business decisions to close under-performing locations,” Wilcox said. “Doing so has allowed us to invest in remodels and new stores in the Washington D.C. area.”

Such arrangements often have resulted in tremendous job losses followed by bankruptcy: At least nine private equity-owned grocery chains have filed for bankruptcy since 2015, including A&P, Tops Markets and Southeastern Grocers. Fairway Market and Earth Fare filed for bankruptcy last month.

‘A way of monetizing poor people’: How private equity firms make money offering loans to cash-strapped Americans

Albertsons and the union are at odds over whether the company should be required to fully support some 50,000 retirees and employees who draw or plan to draw their benefits from the fund. The fund took a hit after the 2008 financial crisis and is short $1.7 billion. It is expected to become insolvent next year.

Union representatives say the contract requires Safeway to increase its contributions to the pension plan when and if it is depleted to ensure its retirees receive the same level of benefits they’ve been getting. The company disagrees.

“We’re just not even in agreement about the basic facts,” Williams said. “Our demand is that they fulfill their obligation to our pension, which means fully funding it to ensure the benefits continue.”

Wilcox said that Safeway has been “thoughtful and reasonable” throughout its negotiations with the union and hopes to arrive at an agreement soon.

An Albertsons spokesperson said earlier to the New York Post that the company would keep contributing to the pension at its current rate but would not cover the additional unfunded amount of the pension plan. Fully funding the pension plan "is neither required by law nor by any agreement we have with the union,” the spokesperson said.

A copy of the union’s collective bargaining agreement reviewed by The Washington Post includes a provision that “if and when the [pension fund] becomes insolvent and benefits are reduced ... a benefit will be effective ... that is equal to the amount of the benefit that would have been provided by the [pension] absent any reduction.”

The agreement also states that “when the benefit protection provision is effective the cost of this new benefit will be incorporated into the Mid-Atlantic Fund hourly contribution rate.”