Labor Relations and Negotiations at the Memphis Kellogg Plant

As with everything, there is no guarantee in business; no one can be assured that he or she will have a job. Companies do their best to turn a profit and keep their employees happy, but sometimes it just doesn’t happen. In the summer of 2013, Memphis’ Kellogg’s Plant was forced to implement layoffs. They blamed this on the “cessation of bran and retail rice production” in Memphis. While they had legitimate concerns, it didn’t go down without a fight.
The Memphis plant was forthcoming in letting its employees know that layoffs were inevitable. They announced in April of 2013 that the impending layoffs would take place in the following months. They even have documentation of letting the mayor know, as well as the union that the employees were a part of. They laid off a total of 70 employees; 33 in June of 2013 and 37 in August.
Not only did they have to lay employees off, they had to negotiate with the ones that kept their jobs to work less hours and restructure some other things as well. This presented a hardship for as many as 220 employees, and it started a snowball effect of issues. Some of these being that all new employees would be part-time, and would receive limited insurance and retirement. The employees affected by the layoffs and cutbacks were members of the Local 252-G union, referred to as BCTGM, which was comprised of the Bakery, Confectionary, Tobacco workers and Grain Millers, and were to be covered by “applicable bumping rights”.
While the Kellogg Corporation claimed that the cuts were necessary to stay in business, the union took a very different stance. Negotiations and meetings started taking place in September of 2013, and as of October, the company and the union had gotten together at least 13 times, but could never come to an agreement on the issues. The current contract was set to expire at 12:01 a. m. on October 20, 2013. The Kellogg Company finally claimed to be done negotiating and implemented a lockout on October 22, 2013 at 7:00a.m.
The lockout and lack of negotiation was still underway in February 2014. According to one of the employees that this impacted, “Kellogg’s is a highly profitable company and just wants to pay people less…Kellogg is yet another American company seeking to knock middle-class workers down a few pegs and chip away at their pay and benefits”. To the company, on the other hand, the Memphis plant is too costly to run and has “high-cost operation and above-market wages that badly need to be brought under control to make the plant competitive”.
The issues of labor negotiations and workforce culture are huge; they hit so many families and can take them to their knees. In the Kellogg’s case, the only thing that people would agree upon is that the pay and the benefits were excellent. People averaged $28 an hour, and didn’t have to contribute any towards their health insurance premiums.
The largest point of contention is that the company was pushing to grow a group of temporary workers, paying them about $22 an hour, and not giving them benefits due to their temporary status. They would eventually become employees of the company, but would have far less charitable benefits.
While the Kellogg Company’s spokeswoman, Kris Charles was claiming that the average employee was earning over $100,000 a year, the employees themselves were validating that but giving the reasons that was possible. According to them, they were only making about $58,000 annually prior to the forced overtime. They were “required to work seven days a week and are often given just two days off a month. Some workers talk of having to work 40 or 50 days in a row.”
By using the lockout, Kellogg’s could be seen as taking advantage of a crumbling labor movement. According to Jake Rosenfield, an expert on labor relations at the University of Washington, “The locked-out workers’ union – the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union - is small and far less powerful than larger unions.” Kellogg is pushing for what other large employers such as, Caterpillar, Boeing and Detroit’s automakers, have looked to, to lessen the typical “blue-collar compensation packages”. Kellogg’s was, at one point, a model company in the food and beverage industry, noted for how well it treated it’s workers, but that has since been tainted, and they are no longer seen as so generous. Some disgruntled employees even claimed that W.K. Kellogg, the founder, “would have been disgusted at what is going on”, as this was not the “normal” company they had come to know and love.
While one could assume Kellogg to be wrong for its dealings, you have to understand that changes happen. In November of 2013, they announced a four year program aimed at lowering costs, and named it the “Project K”. This was done in part because of the decline in cereal sales; people are eating on the go, and cereal is not an item that is easily consumed that way. The company announced in December that they would be closing the plant in Ontario.
Since so many of the Memphis plant’s employees are minorities, lots of civil rights and specialized groups are getting behind the workers. While this may be what America has come to, it doesn’t represent the founding ideas of how businesses were formed. If people were treated harshly and unfairly due to their skin color, then by all means, bring in the people that would fight for their cause, but that is not the case with this particular issue. All workers affected by the lockout and the immediate cut off of health insurance should be protected on the same level, regardless of their skin color.
Like most labor disputes, both sides have very contradictory versions of what is going on. Kellogg claims that the contract they are proposing “does not impact current employees’ wages and benefits and would offer above-market wages for any future hires”. They go on to claim that the employees had job security and that would not be “jeopardized”.
The employees don’t feel safe about Kellogg’s claims as they have witnessed so many of their coworkers laid off. They also dispute the wages, as they have been forced to cut back on hours, and that will subsequently cut their annual incomes by almost 35%. They simply cannot sustain their homes in a manner they have grown accustomed to, by taking the huge cut in pay. They also argue that having to pay into the healthcare plan; will be another hit on their wallets that they have not expected. The common thread that the employees want to emphasize is the not wanting to undermine their children’s generation of the workforce. They believe that the precedence that Kellogg’s is trying to establish is to pay new hires less and less and give them less benefits; they will not stand for their offspring working for such little pay, but more than that, they see that the next generation will be pushed around and not appreciated.
The union claims that the company is bargaining for the right to employ as much as 100 percent of the Memphis plant’s workers as temporary or “casuals” paying them about $6 less an hour. The current contract only allows for the company to hire 30 percent of its employees as temporary or casual. The union fears that if Kellogg’s gets away with doing what they are pushing for then the long-term employees will eventually get pushed out.
Maybe Kellogg’s has a strategy. Their other plants located in Battle Creek, Michigan; Lancaster, Pennsylvania; and Omaha, Nebraska have the lower salary scales that they are wanting to implement in Michigan. They know that employees can/will work for less money and they are willing to wait it out. The union may need to back down and come to an agreement, as they don’t have the bargaining power to force change upon the company. The company has valid points of concern, and they aren’t willing to budge.
According to union officials, “Kellogg is illegally trying to foist new wages and hours upon the Memphis plant that can only be negotiated as part of a nationwide master agreement with Kellogg’s other cereal plants – and not in separate, local negotiations for the Memphis plant”. They are standing on the one hope that the National Labor Relations Board will step in and declare the lockout to be against the law. They believe that the company is “not bargaining in good faith”. The company’s spokeswoman made a comment that “all of the proposals during these “negotiations are supplemental – or local” and can be negotiated separately from the master agreement.”
Recently, the president for BCTGM International, David Durkee proposed a “human rights risk assessment”. He believed that if shareholders really knew they were a part of a company that showed little value for its employees, especially one that was known for its goodness and “wholesomeness” and value of family, they would rise up and fight for the employees; they would want to do the right thing. Durkee spoke on his viewpoints at a shareholders meeting, which in turn created a fire in some of them to back the employees and not the company’s point of view.
He argued that “if the company had done a robust assessment on its U.S. operations it would have discovered that a potential public relations disaster was brewing in Memphis”. A company does not want to be a media spectacle and in the big picture, it can be more detrimental than the financial dollar that is the immediate issue. The Kellogg Company, though it is a large company, was not wise in seeing the backlash that was coming. In the midst of this, they even were giving their higher ups large bonuses and raises. They should have been more sensitive in the current Memphis situation than to operate in such a way. If an organization is truly committed to the success of their employees, this should include all of them, not just the big wigs. This is a sure way to lose credibility and ruin the culture of the company. Durkee went on to state, “For a company whose greatest asset is its brand equity, it is imperative that the company not engage in practices that might erode that brand asset and hurt shareholders value.”
The Kellogg Company didn’t help themselves when they spoke of its “new workforce of the future”. That was detrimental to the ones who had longevity and loyalty to the organization. They could have/should have been more sensitive to the very individuals who helped them turn a continuous profit. The business showed no appreciation wanting to go to a “part time, union free, few benefits, and low pay” workforce.
The National Relations board (NLRB), formally filed charges against the Kellogg Corporation, claiming the company’s violation of federal laws. They petitioned the district court for an injunction, “Because the evidence overwhelmingly pointed to Kellogg initiating an illegal lockout”. The NLRB was hopeful that the court would agree and the employees could return to work quickly, and even get the back pay they deserved.
A 15 year old daughter, of one of the affected workers, put it like this, “I remained hopeful that this situation would resolve soon for many days, but as these days turned to weeks, and these weeks to months, I am starting to wonder why nobody is listening to my plea. It hurts to be ignored.” There could be so much more done to avoid getting families into these types of devastating messes. Other children of the Local 252G members had stories of their own. They created a compilation of their ordeals in a booklet entitled, “In Our Own Words”. The Kellogg Corporation could have handled this deal, or shall I say could still handle this deal, as it is ongoing, in a way that shows more class and integrity. They could have proposed to freeze raises until the company was doing a little better financially. However, if they opted to do this, they should have never given the millions of dollars in bonuses to the higher ups. This is simply not showing any empathy for the people that helped profit you the millions to begin with. They could have formed a task force to come up with a plan to keep the employees happy, yet not lose money in the midst. They could have possibly put into place a way that the employees could have scaled back their hours, or even given them comp time for the overtime they had worked. Another option would be to gradually increase what the employees had to pay for their healthcare. It’s plain that our nation is in a health care crunch, and most people have had an increase in premiums. Kellogg’s should not have had to absorb the entire amount, but they could have softened the blow to their employees. By cutting them off, all together, they have created a firestorm of public opinion and shareholders who are furious about the families with special needs children or chronically ill family members.
One thing we discussed throughout the semester was the benefit of having a large union, as it gives more bargaining power. A problem that the Memphis situation presents is that they feel they need to be heard on a local level, because that is where the impact is happening. There are things that should be addressed on a local level, but both the company and the union agree that there are also things that need to be handled by the Master agreement that would “apply to all four locations” of Kellogg’s in the United States.
This case is still pending and has a court date set for May 5, 2014, so as of now, I can’t report the outcome. I can see both sides of the issue, but believe that the Kellogg’s Corporation has failed to reach the public and their sympathy for the declining sales of cereal. They need to regroup and realize that there might not be the high profit margin that was once so wonderful. They could even opt to close the Memphis plant all together, which would be hard in the short go, but might solve the “big picture” problem. Yes, there would be lots of people out of jobs, but they could enlarge their other plants where the workers make less money, and even offer to relocate some of the employees that are willing to work for a smaller amount of money. They could curb the backlash of hiring temporary workers. By doing this, there is a possibility that all company employees would feel they were going to be cut at any time, as they will have seen that the organization is not willing to fight for them or their families. This could cause people to begin looking for employment elsewhere.
On the other hand, the cereal company could win back the public’s approval by giving the due raises the local union has asked for. The shareholders would take a financial blow initially, but they could gain back the popularity and reputation that the iconic company once held.
What should not happen is for Kellogg’s to get away with doing things illegally just because they are a powerful company. There are labor laws and mandates in place to protect employees from being treated in a wrongful way. Whether or not employees are union or not should have nothing to do with how they are treated. They organize for the simple fact of being protected. Each employee should be treated with value and respect, and not forced into working the ample hours that Kellogg’s has required of them. While the hourly wage is way above the norm, this is the standard that the company has set. The corporation has also set the amount they were willing to pay for healthcare. If they so choose to make adjustments, it should be done with new-hires and not affect the ones that are already employed.
Relationships amongst employers and employees are important. All parties need to feel they have a voice. In this particular case, Kellogg’s may be winning the battle, but seem to be losing the war. They need to realize that their employees are hard working and contribute to their success. They should re-think their negotiations and acknowledge there are better ways to handle situations than to lock people out.

Resources

Greenhouse, Steven. February 10, 2014. Labor Battle at Kellogg Plant in Memphis Drags On. New York Times. http://www.nytimes.com/2014/02/11/business/kellogg-workers-in-4th-month-of-lockout-in-memphis.html?_r=0

“BCTGM, AFL-CIO Submit Proposal to Kellogg Shareholders”. April 25th, 2014. Published on the BCTGM website: http://www.bctgm.org/2014/04/bctgm-afl-cio-submit-proposal-to-kellogg-shareholders/

“Locked out Workers Submit $15 Million Grant Application to the W.K. Kellogg Foundation”. April 24, 2014. Published on the BCTGM website: http://www.bctgm.org/2014/04/locked-out-workers-submit-15-million-grant-application-to-w-k-kellogg-foundation/

Culliney, Kacey. March 27, 2014. Kellogg v BCTGM: Contract Wars over Memphis Lockout. http://www.bakeryandsnacks.com/Manufacturers/Kellogg-v-BCTGM-Contract-wars-over-Memphis-lockout.

Fossum, J.A. (2009). Labor Relations: Development, Structure, and Process. McGraw Hill.