Kroger closes two stores in California instead of paying groceries an extra $ 4 an hour to work at the country’s largest supermarket chain during the corona pandemic. The company blamed a decision by local officials that recently approved a temporary pay increase for some supermarket employees.
Kroger said it will close the stores, a Ralphs and a Food 4 Less, in April due to the law passed by Long Beach City Council in January. While a handful of California cities were weighing whether to impose a “risk payment” on grocery workers, Kroger also warned it could close more stores.
Long Beach became the first California city last month to pass a risk payment ordinance, with the law requiring supermarkets with at least 300 employees nationwide and more than 15 employees in Long Beach to pay an additional $ 4 an hour for a period of 120 days.
Research has shown that front-line workers at work are at a higher risk of exposure to the coronavirus. Such workers are also more likely to be black, Hispanic, or Native American populations that have had higher COVID-19 rates.
Kroger called the city’s decision to heighten the emergency “misplaced”.
“As a result of the City of Long Beach’s decision to pass a regulation requiring additional pay for grocery workers, we have made the tough decision to permanently close the long-term retail locations in Long Beach,” the company said in a statement to CBS Los. Angeles. “This misguided action by Long Beach City Council goes beyond the traditional negotiation process and applies to some, but not all, grocery workers in the city.”
The California Grocers Association has also filed a lawsuit against the city, alleging that the ordinance is unconstitutional because it violates a collective bargaining agreement between grocery stores and union workers.
“Additional wage mandates will have serious unintended consequences, not only for grocers, but their employees and their customers,” Ron Fong, the trade group’s president and CEO, said in a statement to CBS MoneyWatch.
“A 28% increase in labor costs is huge. The grocers will not be able to absorb those costs, and negative consequences are inevitable,” added Fong, citing a study commissioned by the trade group.
“Outrageous Behavior”
Officials in Long Beach allege courts have enforced similar pay increases. Mayor Robert Garcia of Long Beach in a tweet swore a vigorous defense in court.
The United Food and Commercial Workers, a union representing 1.3 million workers, including 55,000 at Kroger, criticized the grocer’s decisions.
“City leaders stood up to take care of these essential grocery workers and ensure that they receive a risk indemnity for the danger they face. that will discourage other cities from doing what’s right and issue risk payment mandates that recognize the threat these workers face from COVID-19, ”UFCW International President Marc Perrone said in a statement.
The problem is likely to continue, especially in California. Montebello City Council last week passed a requirement that major drugstores and supermarkets pay employees $ 4 extra an hour for 180 days, and Pomona expects to consider a similar regulation by March 1. Los Angeles City Council will consider a similar measure. on Tuesday.
More store closings?
Kroger said it could close additional stores in cities that have risk payment requirements. “These misguided mandates could put any struggling store in danger of closing,” a Ralphs spokesman told Mercury News.
Kroger in May ended what it called ‘hero pay’, offered a bonus of $ 2 per hour to the more than 500,000 employees as of April. Instead, the company switched to paying $ 130 million in bonuses, with full-time employees getting $ 400 for and part-time employees $ 200.
Kroger at one point asked quarantined employees on COVID-19 emergency leave to refund what it called “overpayments,” demanding that employees pay back the extra money or consider the collection agencies. Company has withdrawn his claim after a scream.
Kroger has racked up record revenues as the pandemic has encouraged more Americans to come home, boosting sales of food and other grocery items. The company posted more than $ 2.9 billion in corporate profits in the third quarter of 2020, representing an additional profit of $ 1.2 billion compared to a year earlier.
Kroger is forwarding some of that money to investors, with a $ 1 billion buyback announced in September. On Friday, the company announced a $ 147 million dividend payment and expects to increase its dividend over time.
Another major supermarket chain, Trader Joe’s, said on Tuesday that it will temporarily increase the cost of risk for all of its hourly workers in the US by $ 2 an hour from February. The pay hike, which will raise risk-related pay for Trader Joe workers to $ 4 an hour, follows a mandate passed by Seattle City Council last week.