Ralphs Indicted in Hiring Dispute
A federal grand jury in Los Angeles indicted the Ralphs grocery chain Thursday, alleging that store managers violated federal laws by secretly rehiring nearly 1,000 locked-out workers during the bitter Southern California supermarket labor dispute two years ago.
Ralphs used fake names and Social Security numbers and falsified thousands of employee records sent to various government agencies to conceal the rehiring effort, the 53-count indictment alleged. The violations reflected “tacit approval, if not encouragement, by Ralphs’ senior management,” the indictment alleged.
Ralphs’ parent, Cincinnati-based Kroger Co. -- which earlier admitted that some store managers had falsified records to rehire locked-out workers -- denied Thursday that the actions were sanctioned by the company.
Kroger claimed that the rehiring was on a smaller scale than prosecutors were now alleging and that it was the work of a handful of rogue managers.
“The actions were wrong and contrary to explicit company policy,” Paul Heldman, Kroger’s senior vice president, said in a statement.
Kroger contended that only about 200 of the thousands of replacement workers it hired during the dispute were locked-out workers. But prosecutors said the practice was more widespread and occurred at about 90% of the Ralphs stores involved in the dispute.
Ralphs orchestrated the rehiring to better weather the strike and lockout that pitted Ralphs and two other major chains against the United Food and Commercial Workers union for more than four months, the 106-page indictment alleged.
If convicted on all counts, Ralphs and Kroger could face fines totaling more than $100 million, as well as back pay and restitution for Ralphs workers and their union, prosecutors said.
Union officials cheered the indictment, noting that the UFCW had previously sued Ralphs on similar grounds but later agreed to dismiss the suits as part of the contract settlement that ended the dispute.
“This is a vindication of what we were saying from the very start,” said Rick Icaza, president of UFCW Local 770 in Los Angeles, the largest of the seven locals that were involved in the strike and lockout.
Asked whether any individuals -- either within Ralphs’ management or among the workers who were rehired -- would be pursued by authorities, U.S. Atty. Debra Wong Yang said “the investigation is continuing.”
The indictment was the latest fallout from the strike and lockout, the largest and longest supermarket dispute in U.S. history.
It began Oct. 11, 2003, when the grocery workers union struck Vons and Pavilions, both owned by Pleasanton, Calif.-based Safeway Inc. Ralphs and Albertsons Inc. had been bargaining jointly with the Safeway stores and locked out their workers in solidarity.
More than 59,000 workers at 852 supermarkets in Southern and Central California were involved in the dispute. That included about 300 Ralphs stores that employed 19,000 grocery clerks and meat cutters, authorities said.
The strike and lockout disrupted shopping habits for millions of consumers and caused severe financial hardship for thousands of the supermarkets’ workers, especially toward the end as their personal savings and union benefits ran dry.
The struggle finally ended Feb. 29, 2004, when members of the food workers union ratified a new contract that provided reduced wages and health benefits for new hires.
Many observers suggested then that the grocery companies won the dispute because the new contract would lower their labor costs. The chains argued that they needed the savings to compete with Wal-Mart Stores Inc. and other low-cost mass merchants that were aggressively expanding into the grocery business.
But the three chains collectively lost more than $1.5 billion in sales and hundreds of millions in profits during the dispute as shoppers flocked to alternatives such as Stater Bros. Holdings Inc. and Trader Joe’s.
All three still are struggling to regain all of the customers they lost. For example, continuing problems in Southern California are one reason Boise, Idaho-based Albertsons recently put itself up for sale.
And the supermarket chains face legal challenges on other fronts. A lawsuit filed by California Atty. Gen. Bill Lockyer alleges that a mutual-aid pact forged by the supermarket chains to support each other financially during the dispute violated federal antitrust laws.
The chains deny the claims and say the agreement was legal.
For Kroger, the nation’s largest traditional supermarket chain with annual sales of nearly $60 billion, $100 million in fines would be a relatively minor financial blow.
But the indictment and any subsequent conviction “is going to cause them damage -- public relations damage if nothing else,” said George Whalin, president of Retail Management Consultants in San Marcos, Calif.
“The public doesn’t like that kind of stuff,” he said. “They think businesses ought to play fair.”
Yang, the U.S. attorney, noted that federal labor laws prohibited a company from selectively rehiring workers while a lockout was in effect. The other criminal counts in the indictment included alleged violation of laws covering identity fraud and obstruction of justice.
Besides allegedly falsifying the rehired workers’ identities, Ralphs also issued thousands of weekly payroll checks under the false names and then allowed the workers to cash their checks at Ralphs stores, the indictment alleges.
The alleged actions were aimed at undermining the union’s position in the dispute, the indictment stated. The tactic allowed Ralphs to rehire experienced workers, reducing the effect of the dispute on its operations and enabling it to endure an extended standoff with the union.
Kroger noted that the National Labor Relations Board’s regional office in Los Angeles had dismissed a union complaint based on the same allegations as those contained in the indictment.
In a letter dated Oct. 24, 2004, NLRB Regional Director James McDermott said an investigation at the time showed that Ralphs had rehired only a “minimal” number of locked-out workers during the dispute and that there was no evidence that the company acted with a “discriminatory motive.” The supermarket workers union has filed an appeal that is pending before the NLRB in Washington.
Prosecutors alleged that Ralphs made “false statements to the NLRB to cover up the full extent of its unlawful conduct during the lockout.”
Prosecutors said they also examined hiring activity by Safeway and Albertsons during the dispute, and decided to take no action against those chains.
Ralphs is scheduled to be arraigned on the charges early next year, prosecutors said.
Kroger’s stock fell 22 cents to $18.99 a share.
Times staff writer David Rosenzweig contributed to this report.