River Valley Co-op
Questions About Employee Wages and Shuttle
May 25th, 2017
See the following recent questions from Co-op owners to the Board of Directors and the response from the Board of Directors:
At River Valley Co-op excellent staff treatment is extremely important to us. We strive to employ fulltime staff, provide good benefits, wages and pay regular wage increases.
In response to all of your questions, the simple answer is that the wages paid for all our non-supervisory staff, including starting wages, are the wages required to be paid under our collective bargaining agreement covering non-supervisory employees. These wages were not dictated by the Co-op, but were negotiated by the Union and employee representatives in an interest-based negotiation process and voted on with approval by the employees at the close of negotiations. River Valley Co-op’s pay rates are what the Union professionals, employees who participated in the Union collective bargaining, the Federal Mediator who facilitated our interest based bargaining process and the Co-op’s financial managers who negotiated the contract agreed made labor relations and business sense for River Valley Co-op. River Valley non-supervisory staff are represented by one of the largest grocery unions in the country, the UFCW, and we at the Co-op intend to honor that collective bargaining agreement during its term, which expires on October 30, 2018.
Below, and in answer to your questions, we provide additional information about the Co-op’s business reasons for the wages it agreed to pay through October 30, 2018.
Why don’t we pay a starting wage of $15 per hour to all employees (plus benefits)?
Paying $15 would cost more than $1 million dollars per year. We do not believe that raising wages beyond the agreed amounts in our negotiated union contract would be financially prudent at this point in time.
Our average pay rate in March of 2017 was $13.55 per hour. That is before we factor in the total compensation package, which includes health insurance, disability insurance, vacation time, sick time, life insurance, and discounts on purchases.
To raise that additional $1 million dollars, we would need to raise prices. We face continuing pressure for reduced prices, to make sure our products are accessible to the community and because our supermarket competitors already nationally average only a 1% profit and often offer the similar products at a reduced price. We are looking at increasing our economies of scale by opening a second store, which is discussed in more detail below, but this will not happen overnight.
Why don’t we pay employees additional wages instead of distributing patronage to owners?
This question implies that patronage refunds can be reduced in order to increase wages. The reality is that reducing profit to owners to increase wages is not as straightforward as the question infers. As a consumer owned cooperative, tax laws allow us to retain 80% of our profits on sales to owners which is our primary source of funding for our operations. If we distribute 20% of that profit back to our owners, we reduce our taxable income by 100% of allowable owner profits. If we didn’t distribute these patronage refunds to owners, we would have to pay more in taxes which would take more capital out of our Co-op and our community. Because of the cash impact of this, decreasing patronage refunds would not necessarily support increased wages.
Why don’t we use our considerable profits to raise wages?
This question assumes that the Co-op makes considerable profit. However, that is not the case. It is important first to understand the distinction in financial terms between "profits" and "sales." "Sales" are the top line on the income statement, before any expenses are deducted. "Profits" are the bottom line on the income statement, after all the costs of doing business are deducted. In the grocery industry, and at our Co-op, these are typically considered pretty 'slim', as in 'slim profit margins' or one might call it a 'low margin' business.
The Co-op’s sales have been excellent and have grown to $27 million/year. However, our profit margins are typically just 1-3% of our sales total and profit margins, including those of our Co-op, are on a downward trend industry-wide. We were able to grow our sales following the remodel, but our capacity is continuing to be challenged. We desire to open a second store, both to retain the sales we’ve gained, and, perhaps most important, to realize economies of scale that can come with having multiple stores.
Businesses of our size have several tools to increase profit: benefit from economies of scale by increasing sales, raise prices, or cut expenses. The only reasonable tool from the Co-op’s perspective is opening a second store to increase our economies of scale. This is the big challenge that River Valley Co-op currently faces: to continue to serve our owners with more efficiency, and keep increasing the local economic benefits of our operations supporting the local farmers and businesses and our employees. We do not believe that raising wages beyond the agreed amounts in our negotiated union contract would be financially prudent at this point in time.
Why don’t we pay all employees at the Co-op a living wage?
The concept of a living wage is not a well-defined one and has no clear consensus. A person can review several sources and find different definitions and numbers for a living wage. However, for purposes of this response we’ve relied on the Living Wage Western Massachusetts’s data on living wages. According to that data, the living wage for an employee living in Western Massachusetts is $12.34/hr and for an employee living in Northampton the living wage is $13.36/hr.
Based on the Living Wage Western Massachusetts’s data, the majority of our workforce is already making the living wage threshold or above. Further, we’ve agreed with the Union to wage scale increases in October 2017 that will bring nearly 95% of our staff to the Western MA livable wage level, and 76% to the considerably higher Northampton livable wage. We have increased our overall wage scale through regular contract negotiations with the Union as our business has grown in addition to building longevity increases into the wage scale. Staff wages are a key and very important issue, from both a moral and principled point of view as well as the more practical need to attract and retain talented staff.
Wages are one element among many that need to be carefully balanced every day. We also offer significant benefits (health insurance, disability insurance, vacation time, sick time, life insurance, discounts on purchases, potential for gain-share bonuses, and over 90% full-time employment) as part of our employees’ overall compensation packages. The industry as a whole increasingly relies on part-time employment and doesn’t prioritize full-time employment and benefits as our Co-op does. A higher hourly wage isn’t really a livable wage unless you get enough hours and we’ve placed a high value on providing full time jobs with benefits. And, our excellent benefits always score high in our staff satisfaction surveys.
While we currently start our lowest positions at $11.25, staff progress on wage scale quickly over the first year as you can see from the following table. Seniority is one of the union values and increases based on time in service are built into our wage scale.
There was a request for transparency on all wages including manager and supervisor wage levels.
We don’t disclose manager and supervisory wage levels to member-owners or the public for employee privacy reasons and competitive reasons. We strive to pay competitive wages for appropriate skills so that we can attract good talent to manage the cooperative. We can tell you how our overall wages compare to our labor market. Our average management and supervisory positions pay between 44%-87% of the median for comparable positions in our labor market (MA Bureau of Labor Statistics) with most falling between 44%-65% of the median. In comparison our non-supervisory positions are compensated slightly above the median for comparable positions. This brings our lowest and highest paid positions much closer together than most businesses.
How are we progressing to resolve the shuttle issue?
The Board Response to the Shuttle issue written last October still stands (and it can be found on the Co-op website). This is an issue discussed, decided on and democratically voted on by employees as part of contract negotiations. Employees chose to accept the collectively bargained agreement, including the provision of raises for all employees in lieu of shuttle pay for some employees when our last union contract finalized in late 2015. This decision was reached through a collaborative process with Co-op management and the Union and ratified by staff in the subsequent union contract. Of course issues can arise between contract signings, but nothing has changed materially since that contract was negotiated. However, that being said, there are procedures for the Co-op and the Union to resolve issues during contract cycles. From our letter to owners (emphasis added):
“…the Union has raised an issue of dissatisfaction with the contract that it negotiated, agreed to and ratified; and so far has refused to utilize the processes that we have agreed in our contract to use for conflict resolution. Instead we are threatened with legal action and a public campaign that would damage the Co-op’s reputation if we didn’t make substantial payments.”
We have continually pushed to use the established mediation process to resolve this issue. As of this writing, a mediation has been scheduled. We are hopeful that this issue be resolved, finally, through the agreed upon negotiation process.
Note: The union structure prescribes the processes for resolving issues. If Board comments have been minimal, this is one reason, along with the unfortunate stalemate described above.
The retail grocery business is extremely competitive and organic/natural markets are increasingly being challenged by very large companies. Our closest grocery neighbor, Big Y, has $1.7 billion in annual sales (70 stores), Stop and Shop, $15.2 billion (422 stores), and Whole Foods $12.9 billion (431 stores). All of these stores sell some of the same products we do, and all of these businesses have a considerable advantage of efficiencies of scale compared to our $27 million (one store) business, yet we have highly competitive starting wages, and are confident that we do a better job with employee wages and benefits overall. That’s because providing good jobs is a core part of our mission and vision. Finding the right price/wage balance is an ongoing and not insignificant challenge in an increasingly competitive grocery environment. We are pleased with our progress so far, but know that this challenge will be an ongoing one.
And the Board is well aware of the difficulties that have come with our growth, limited resources and tight physical space. Please be assured that plans to address areas of employee concerns have been put in place, and that we are closely monitoring progress on these issues. Staff treatment is very important to us. Any workplace can have situations and experiences that some employees don’t like; since we began our partnership with the Union, we have had the Union’s support in ensuring consistent, fair staff treatment. The Board believes we are fortunate to have an exceptionally talented group of managers and staff. We are hopeful that the upcoming mediation process will get that relationship back on track.
Thanks again for your concerns.
Dorian Gregory, President
River Valley Co-op Board of Directors
River Valley Co-op
Board of Directors Response to Labor Questions
February 5th, 2017
Increasing Wages for All vs. Paid Commuter Time for Some
Thank you for your interest and support of the co-op and our employees. We appreciate the opportunity to respond to your concerns and questions about the free parking shuttle the Co-op provides.
We want to assure you we continue to be willing to work with the Union to resolve this issue through the processes we’ve agreed to in our labor contract. The following is some additional information:
First Some History of the Issue Our staff is represented by the UFCW Local 1459. Shuttle pay came up during negotiations with the union in 2015. The shuttle issue was fully discussed over a number of sessions and completely addressed in bargaining. Management and the union looked at the concerns together. All views were given a voice. A solution was crafted on which we all agreed.
Both the union and the co-op agreed that the fair and equitable resolution was to grant all employees a larger wage increase because some employees ride the shuttle and some do not. We achieved this solution with the assistance of the Federal Mediation and Conciliation Service who helped facilitate our collective bargaining sessions.
The proposed agreement was presented to the staff, who had the option to reject it if they weren't happy with it. Instead, they ratified the contract. The union agreed that the shuttle issue had been resolved for the 3-year contract period, and the matter appeared settled through 2018.
Since then, some staff have expressed dissatisfaction with this aspect of their Collective Bargaining Agreement. We have good processes in place through the agreement with the Union to resolve issues that come up. If staff believe that the labor agreement we entered into last year is problematic, there are procedures that employees can use for grievances. Some have chosen not to use these procedures on the shuttle issue. Instead a public campaign has been organized.
How River Valley Seeks to Solve this Issue The co-op has repeatedly asked the union to honor and comply with the labor contract by using our agreed upon processes to resolve this issue. The co-op is and has always been willing to listen with an open mind and work for a solution.
We hope you can understand that it might be more complicated than it looks to resolve an issue that we were already assured was resolved through collective bargaining. It is further complicated because the union has raised an issue of dissatisfaction with the contract that it negotiated, agreed to and ratified; and so far has refused to utilize the processes that we have agreed in our contract to use for conflict resolution. Instead we are threatened with legal action and a public campaign that would damage the co-op’s reputation if we didn’t make substantial payments. This was confusing to say the least.
Seeking and Receiving Clarity from the State of Massachusetts For clarity on the legal issue we sought an opinion letter from the MA Wage and Hour Division. Receipt and review of the state’s written legal opinion reinforced our confidence that our practices are completely within the law on this matter.
We shared the state’s letter with union, yet they decided to go forward with a legal complaint anyway and again refused our request to process this issue through the grievance procedures in our labor agreement.
Further, we believe that the union campaign’s unfair labor practice allegations are grievances that legally should be deferred to the mutually agreed upon resolution process. We did not refuse our employees the right to leaflet and we did not discipline anyone for doing so. We do not believe we’ve violated the National Labor Relations Act. We are asking the National Labor Relations Board to resolve this.
River Valley Moving Forward to Resolve River Valley Co-op is a progressive employer of over 150 people, about 95% full time with benefits. We are not perfect and we make mistakes, but we welcome the opportunity to resolve all our issues in the spirit of mutual respect. We believe in the labor movement. We consider it aligned with the cooperative movement in working for democratic solutions that empower people and communities.
We appreciate your patience and understanding during this process. We hear our employees concerns and we ask for your support in our call upon the union to resolve these issues through our collective bargaining agreement.
In conclusion, our agreement with the union is to engage in a cooperative interest-based relationship. A win/lose, zero/sum approach is confusing and damaging to any working relationship. We continue to have an open mind about resolving this beneficially for all and request that this issue be resolved through the processes that both the union membership, union leadership and the co-op have agreed to, the grievance and binding arbitration provision of the labor agreement.
Preserving the great working relationships that we have with employees and the wider community are important to us. We’ve worked hard to do that. We hope the facts outlined here help you to know more about our efforts to date. We all have the same mutual interests for our Co-op, our employees, and the community. Thank you for your interest in helping us to achieve our goals.
Board of Directors Response
Increasing Wages for All vs. Paid Commuter Time for Some
Updated December 9th, 2016
Recently, we have received a variety of questions and comments from co-op owners related to how River Valley Co-op compensates its employees for commuter time. Please know, we strive to provide as many benefits as possible to our employees, and have carefully constructed a benefits package with the employees’ union to be as supportive and competitive as possible.
We hope the following background and information will provide more context to this issue:
Foremost, River Valley Co-op strives to work in harmony with its union. In 2012, we partnered with the UFCW Local 1459 – a partnership that speaks to the co-op’s commitment to employees.
Many employees are requesting they be paid for their time on our courtesy shuttle to/from our complementary off-site employee parking lot. We respect and appreciate their feedback. However, we recently entered into a union contract in which employees opted to pass on this particular benefit in favor of others.
Specifically, the union agreed the shuttle commuter time would not be compensated. During 2015 collective bargaining agreement sessions for our current union contract, some suggested that car-driving employees be paid for time on the shuttle. After the union and management reviewed potential costs, we collectively agreed to additional increases to the wages for hourly staff for time worked instead of paying the cost of shuttle commuter time. The union contract was ratified by a vote of the unit member employees.
Compensating for commuter time is not required by law. Massachusetts and federal law state that regular workplace commute time and costs like that spent on the shuttle are not reimbursable or compensable. A recent opinion letter from the Commonwealth of Massachusetts Executive Office of Labor and Workforce Development Department of Labor Standards reinforced this.
We far exceed benefits conventional grocers provide. We employ approximately 150 employees; 90% are full-time (as compared to less than 50% at conventional corporate retail grocers), with benefits. In addition to services that include the free off-site parking and the shuttle, our benefits include: insurance options, paid holidays, paid vacation and personal/sick time, and purchase discounts.
We wish we could provide even more benefits to our employees. However, we must balance competing needs at many levels including wages, service levels, fair prices for producers, and fair prices for our customers. We hope this information addresses your questions and concerns. Please let us know if there is any more information we can provide.