Its Owner Says Biggest Hen Ranch Is Cracking Under Costs of Labor
There’s trouble at the world’s largest chicken ranch, and lots of feathers are being ruffled.
On one side of the feud is Richard Carrott, a 37-year-old former television actor and owner of the Egg City ranch in Ventura County. Carrott, who a few years ago chased space-age hoodlums while playing “Cadet Capt. Chris Gentry” on a Saturday morning television show, believes he is being portrayed unfairly as the heavy in the labor dispute at the 300-acre ranch near Moorpark.
Egg City this month filed for protection from creditors under Chapter 11 of the U. S. Bankruptcy Code, and Carrott insists he must slash wages by as much as one-third to stay in business.
On the other side are about 240 workers, most of whom make from $6.07 to $7.69 an hour taking care of the ranch’s 3 million hens and processing the more than 2 million eggs produces daily.
The employees and their union, the United Farm Workers, claim Egg City hasn’t negotiated fairly in the eight months since their last contract expired and charge that the ranch is trying to oust the union. They also accuse Egg City of imposing stiff productivity demands and unfair working conditions such as limiting employees to one restroom trip every two hours.
The conflict is attracting widespread attention among California farmers. Labor law experts say Egg City could become the first farm employer in California to use the bankruptcy courts to challenge its labor contract obligations. The ranch has said that, if the UFW rejects its bid to reduce wages by $2 an hour, it will ask the bankruptcy court to approve wage cuts, although some legal experts say the move is unnecessary.
The Egg City dispute also represents a major challenge for Cesar Chavez’s already troubled union, which is suffering from a lack of new members and increasingly combative growers who have drawn support from the state Agricultural Labor Relations Board. Officials of the board said they believe Egg City, California’s only unionized egg ranch, has the largest unit of UFW-represented workers employed year-round in California.
In the 1970s, Egg City was the site of one of the UFW’S biggest victories in its bitter struggle with the Teamsters Union over the right to represent California farm workers. The UFW prevailed in 1978 after three years of court fights and elections, including one marred by stolen ballots.
Sales of $45 Million
The ranch was founded in 1961 by Julius Goldman, who fled Germany during the Holocaust. It quickly grew into the nation’s premier producer. Arnold Kupetz, Egg City’s bankruptcy lawyer, said the ranch expects sales this year of about $45 million.
Goldman sold the business over several years in the 1970s to Cincinnati-based Kroger, the big supermarket chain. Kroger, in turn, sold the ranch in May, 1985, for an undisclosed price to Carrott. The ranch’s formal name now is Careau Group, Kupetz said, and Carrott is its only shareholder.
A native of Indianapolis, Carrott decided several years ago to quit a struggling acting career that included bit parts on the television shows “Love Boat” and “Three’s Company” to go into the egg business. He said he made the decision after listening to a dinner conversation between his father-in-law, an egg industry executive, and an official of a pet-food company who used flawed eggs that people wouldn’t buy.
Kroger was losing about $500,000 a month operating Egg City when he bought it, Carrott said. Those losses have been cut but still amounted to $1.85 million during the six months from October to March, according to Kupetz. In its bankruptcy petition, the company listed liabilities of $24.1 million against assets of $21.5 million.
Egg City still owes Kroger, one of its three secured creditors, about $8 million. The other two secured creditors are CoastFed, a Los Angeles commercial finance company that also is owed about $8 million, and Okura, a Japanese trading firm whose $1 million debt is collateralized by nearly 400,000 chickens.
Carrott blames the ranch’s losses largely on its labor costs, which he claims are 30% to 50% higher than those of his competitors, all of which are non-union. He won’t disclose his labor expenses, but university studies show that California egg producers last year spent an average of 7.5 cents on labor to produce, package and ship a dozen eggs.
Free Eggs for Workers
Besides seeking a wage reduction, Carrott wants concessions such as a temporary elimination of the practice of giving workers five dozen free eggs every two weeks.
The UFW doesn’t deny that Egg City has financial problems, but it accuses the company of withholding key financial information from workers, making it hard for union leaders to evaluate the proposed concessions.
“They’re giving us a sanitized version of the books. It’s not the real thing,” said Oscar Mondragon, head of the union’s horticulture division.
Carrott insists that he has given comprehensive financial data to the union during negotiations.
Industry officials said the financial troubles at Egg City mirror the problems of California’s egg business, the largest in the nation, which has suffered from chronically soft prices stemming from overproduction.
California egg producers this month have gotten an average of about 47 cents for a dozen large, top-grade eggs. For all kinds of eggs, producers have received an average price per dozen of about 43 cents. According to industry officials, that is about 5 cents a dozen below the price producers need to break even.
Decline in Consumption
Industry experts say egg consumption has declined steadily in the United States for years because of concerns about cholesterol and because fewer people eat breakfast. Americans ate an average of 255 eggs apiece last year, including eggs in baked goods, according to the California Egg Commission. That is down from 261 in 1984 and 403 at the end of World War II.
Besides arguing about pay, the two sides have squabbled over workers’ restroom breaks. Rob Roy, a labor lawyer representing the ranch, said the number of trips was limited because some workers were taking too many, possibly to pressure the company by slowing production.
Mondragon denied Roy’s assertion and said the restroom rules, which require workers to sign a sheet before leaving their stations, humiliate employees.
Seeking to pressure Egg City, the UFW has threatened to boycott stores that sell the firm’s eggs. To head off that threat, Egg City will ask the National Labor Relations Board this month to reclassify the company as a non-agricultural employer, which would make it subject to federal, rather than California, labor law. Such boycotts of retailers are prohibited by federal labor law.
Egg City plans to point out to the NLRB that, because of increased egg processing at the ranch, 75% of its employees are now commercial, rather than agricultural, workers. Egg processing includes sorting, washing and packing eggs in cartons. It also involves separating yokes and egg whites for shipment in liquid and powdered form to bakers and other food makers.
Certification Issue
An NLRB decision in Egg City’s favor would do more than prevent the union from launching a boycott. It also would eliminate the UFW’s certification under state law to represent the ranch’s workers. That would mean the UFW would have to seek recertification under federal law, a move that could be opposed by the ranch.
Egg City’s other strategy of threatening to use the bankruptcy courts to gain wage cuts has puzzled labor law experts.
They speculate that the Egg City’s motive in filing the Chapter 11 petition was largely to pressure the union. Labor law experts said the expiration of Egg City’s labor contract already gives the ranch a way to impose wage cuts.
They said the ranch could force concessions by bargaining to impasse, which would allow it to enforce its last formal offer.
“If the contract has expired, then there is an obligation both under the National Labor Relations Act and the State Agricultural Labor Relations Act to maintain the terms and conditions of the old contract until you bargain to impasse. Once that happens, then there’s no contractual obligation,” said David Feller, a law professor at the University of California, Berkeley.
Egg City’s lawyers said an order from the bankruptcy court supporting a move to cut wages would bolster their case if the UFW raises charges of unfair labor practices.
The ranch’s financial problems are well known in the state’s egg industry. Officials with one major egg producers cooperative, West Coast United Egg Producers in Upland, said they dropped Egg City as a member last month because it wasn’t paying membership dues.
Bill Jasper, the cooperative’s president, said California’s egg industry would be hurt if Egg City closed because of the effect on its suppliers that are owed money. Furthermore, he said, if the internationally known ranch goes out of business, the industry’s image will be tarnished.
“Nobody is gloating over the fact that Egg City is in trouble,” Jasper said.
