Pressuring Workers to Accept Pay Cuts : Egg City Seeks Bankruptcy Shield
Egg City, the world’s largest chicken ranch, has filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, largely to pressure United Farm Workers members to accept pay cuts at the Ventura County ranch, company lawyers said Monday.
Labor law experts said Egg City’s filing marked the first time that a California agricultural employer has sought bankruptcy court protection to win wage concessions and possibly nullify its obligations under a union contract. The case also reflects the building tension in the long-running dispute between management of the 300-acre ranch located outside Moorpark and the UFW over one of the union’s biggest contracts in California.
New Contract Proposal Due
The Egg City filing was made late Friday in U.S. District Court in Los Angeles under the ranch’s formal name, Careau Group. The petition listed assets of $21.5 million and liabilities of about $24 million, said Arnold Kupetz, an Egg City lawyer.
Lawyers for Egg City, which previously sought a two-year wage freeze, said a new contract proposal will be submitted to the union soon. The new plan would cut wages for about 240 union workers to bring their pay in line with that of the ranch’s competitors, all of which are non-union. Egg City’s management staff of about 40 would not be affected by the offer.
If the union rejects the proposal, company lawyers said, Egg City will ask the bankruptcy court to free it from its previous union contract, which expired last September.
Despite the contract’s expiration, Egg City still is bound under California’s Agricultural Labor Relations Act of 1975 to maintain existing wages and working conditions, said Rob Roy, an Oxnard lawyer handling Egg City’s contract negotiations.
The use of a bankruptcy filing to win contract concessions is reminiscent of a tactic used by Continental Airlines in 1983. The airline successfully used a bankruptcy court filing to cancel its union contracts, arguing that its survival was endangered by the contracts.
Labor law experts said the Egg City case is noteworthy in that it might challenge the ranch’s obligations under California’s 11-year-old farm labor act.
UFW lawyers said Monday that they did not want to comment on the bankruptcy filing because they had not seen it. But Oscar Mondragon, the general manager of the union’s horticulture division, claimed that Egg City has refused to open its books to the union to prove that the ranch needs concessions to stay in business.
“We’re willing to talk about it and are not that insensitive,” Mondragon said. “We want the place to survive and the workers to have jobs, but we believe that the company is playing games with us.”
Tensions at the ranch have risen over the past month. Negotiations were halted, workers called a one-day strike and the UFW threatened to boycott stores carrying the ranch’s eggs. The ranch, citing its financial problems, laid off 68 employees two weeks ago.
Most workers at Egg City are paid according to such job classifications as chicken feeder and maintenance worker, earning from $6.07 to $7.69 an hour. Pay for egg gatherers, who make up about one-third of the work force, hinges on their productivity.
Egg City maintains that its labor costs are 30% to 50% higher than its competitors’ but won’t disclose its overall labor expenses. A UC Riverside study found that the state’s labor costs for production, shipping and packaging average 7.5 cents per dozen eggs.
Founded in 1961
Egg City, listed for years in the Guinness Book of World Records as the world’s largest chicken ranch, was founded in 1961 by Julius Goldman.
The ranch still is widely known as Goldman’s Egg City, even though he sold his interest over several years during the 1970s to Kroger, a Cincinnati-based supermarket chain.
Richard Carrott, a 37-year-old former television actor, bought the ranch a year ago from Kroger for an undisclosed price through Careau Group. He is Careau’s only shareholder.
The ranch has about 3 million hens and produces more than 2 million eggs a day. Carrott has said it had annual revenue of about $40 million under Kroger and was losing $500,000 a month when he bought it. He said the losses have fallen since, but he declined to elaborate.
