Retirees Caught in Cross-Fire : Labor Negotiations Created Havoc With Health Benefits

Ernie Guerrero worked 40 years in Thriftimart’s produce warehouse. After he retired, a French corporation bought the chain, sold off some of the markets and transferred others to a subsidiary. That company, Smart & Final, inherited responsibility for Guerrero’s retirement benefits.

Guerrero knew his benefits would be paid the same way--through a health and welfare trust jointly funded by his union, the Teamsters, and an association of markets. He had every reason to assume the benefits were secure.

Which is why the last six months have been so nightmarish for him.

Out of the blue last February, Guerrero’s health coverage was terminated. The following month, his diabetes flared up, forcing amputation of his left leg. Medicare picked up most of the cost, but that still left the 74-year-old Norwalk man with bills of $11,000. He paid what he could, but eventually began receiving letters from collection agencies.

His union blamed Smart & Final. Smart & Final blamed the health and welfare trust.

The cross-fire that ensnared Guerrero and about 200 other Smart & Final retirees is only now being resolved. The retirees will be reimbursed for their health care costs. But what remains is a lesson about how a company’s labor negotiations can play unintended havoc.

Smart & Final operates a chain of 102 wholesale grocery stores, most of them in Southern California. Its 400,000-square-foot warehouse in Vernon has been a close-knit “family” workplace. Generations of relatives have passed through, many staying for 30 or more years. Ernie Guerrero’s first boss was the grandfather of Smart & Final’s current president, Roger M. Laverty III.

Separate Contract Wanted

Last year Laverty informed Teamsters Union Local 630 that he wanted to change the terms of employment. Rather than continue to abide by the terms of the Teamsters’ master contract with the Food Employers Council, which represents supermarket chains, Smart & Final wanted a separate contract when the old one expired in the fall of 1988.

Negotiations began last fall but stalled over provisions that the union said would make it too easy for Smart & Final to subcontract work to non-union firms and open up new non-union warehouses. Laverty contended that the Teamsters were simply unwilling to sign anything that departed from the Food Employer Council master pact.

In November, the union struck the warehouse and most of the 200 warehousemen and drivers walked out.

A month later, during negotiations to settle the strike, Smart & Final said it planned to withdraw from the Teamster-employer health and welfare trust and would provide separate coverage for its workers.

Last February, in the 14th week of the strike, the company sent a letter to strikers warning that they would be permanently replaced unless they returned. About two-thirds of them did.

At the same time, the company began to change the way it financed health benefits. It was here that the lives of the retirees became rocky.

Smart & Final assumed it could withdraw its active workers from the Teamster-employer health and welfare trust, transferring them to a private health plan, but still keep its retirees covered under the trust. It was a move intended to take advantage of the trust’s cheap retiree rate, about $50 a month per person.

But lawyers for the trust nixed the idea. They argued that retiree coverage could not be paid separately since it has historically been funded by a small share of company contributions made on behalf of active workers. If the trust didn’t cover a company’s active workers, it wouldn’t cover the retirees.

“I did miscalculate on that,” Laverty said of the trust’s rejection of his plan.

More Costly Coverage

Smart & Final faced the prospect of having to purchase its own retiree coverage--something that would cost roughly six times as much as the retiree coverage provided by the trust.

With workers living longer and with the baby-boom generation drawing closer to retirement, many companies face such problems. Nationwide, retirees now account for 13.7% of employer health care spending.

So, in an attempt to avoid paying the high cost of separate retiree health coverage, Smart & Final sued the health and welfare trust in federal court, claiming that the trust--not the company--was responsible for covering retiree health benefits.

The retirees’ medical coverage through the trust ended on Feb. 28.

“We’ve just been playing it by ear,” said Ofelia Manzo of San Pedro, whose husband, Louis, worked at Smart & Final for 42 years as a forklift driver. “We can’t go anywhere. We can’t go on a vacation.”

The plight of the retirees galvanized a small group of Smart & Final workers who had remained on strike in February when the company issued its come-back-or-be-replaced warning.

Most of the less than 20 who are still on strike have low mortgage payments or working wives and can survive, if marginally, on $150-a-week Teamster strike pay.

“Part of my decision was that I couldn’t work (under a) non-union (contract). And then with the retirees, to me it would almost be like slapping your parents in the face,” said striker George Blunt, 56, of Whittier, who has worked at Smart & Final for 29 years. “They’re the reason this country has the standards of living that we do.”

Blunt is bitter about his fellow workers who went back. A Smart & Final worker who crossed the picket line said he understands the anger.

Economics Cited

“I feel bad every time I walk in, but you come to a point where what can you do? Most people live from week to week. They got house payments. If I was out there (still picketing) I’d be mad too,” said the worker, who spoke on the condition of anonymity.

It was not until last weekend, after living without health insurance for half a year, that retirees received notice that a compromise had been reached between Smart & Final and the trust. The two sides have agreed to share retiree benefits, and retirees will be reimbursed for all expenses incurred since February, the company told them in a letter.

A spokesman for the trust confirmed the agreement but declined to discuss the terms. Court approval of the settlement is expected next month.