bankruptcy and strike replacments

  

Articles are attached.APA Format In
January 2012, the 86 year old Hostess Brands, which is known around the
world as the “Twinkie Maker,” filed for bankruptcy protection. As a
result, 19,000 workers were left without a job.
Hostess was successful in reaching a new contract with its largest
union, International Brotherhood of Teamsters, but talks between the
company and its second largest union, the Bakery, Confectionery, Tobacco
Workers & Grain Millers International Union were unsuccessful and
the union went on strike. Hostess then filed for bankruptcy arguing
that the company could not financially handle an extended nationwide
strike. This was the second
time the company had to use bankruptcy to address its finances with many
of the issues being blamed on the unions and their contractual cost to
the company. In the end, thousands of workers are out of work with the
potential of only 1,500 being picked-up by the new owner. 
Do
you feel that Hostess’ decision to file for bankruptcy was a result of
the financial burden imposed by the strike as management claimed, or was
it a way out for a struggling company that was already headed to its
second trip to bankruptcy court? Please explain.The
new CEO does not expect for the company to be represented by unions
going forward, what strategies could management use to prevent the newly
hired employees from feeling the need to become unionized? International
Brotherhood of Teamsters was willing to accept the terms of the new
contract, while the Bakery, Confectionery, Tobacco Workers & Grain
Millers International Union rejected the new contract and imposed a
strike.  What lessons could other unions learn from the outcome of this
strike?Union
president, David Durkee, believes that the union is in a better
position as a result of the strike. Do you agree or disagree?  Please
support your answer.
Part 2
Explain
what have you learned about strike replacements.  Should the NLRA be
revised to prohibit the use of temporary or permanent strike
replacements?
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Hostess Brands Closing for Good
By Chris Isidore and James O’Toole @CNNMoney November 16, 2012: 6:15 PM ET
http://money.cnn.com/2012/11/16/news/companies/hostess-closing/index.html
NEW YORK (CNNMoney)
Hostess Brands — the maker of such iconic baked goods as Twinkies, Drake’s Devil
Dogs and Wonder Bread — announced Friday that it is asking a federal bankruptcy
court for permission to close its operations, blaming a strike by bakers protesting a
new contract imposed on them.
Hostess’ nearly 18,500 workers will lose their jobs as the company shuts 33
bakeries and 565 distribution centers nationwide, as well as 570 outlet stores. The
Bakery, Confectionery, Tobacco Workers and Grain Millers International Union
represents about 5,000 Hostess employees.
“We deeply regret the necessity of today’s decision, but we do not have the financial
resources to weather an extended nationwide strike,” said CEO Gregory Rayburn in
a statement.
for some of its most popular products, which could be scooped up at auction and
attached to products from other companies.
A letter that Hostess sent to its network of stores that carry its product said it
expects “there will be great interest in our brands.” But it said it could not give a
time frame for when the sales would take place and when its products would be
available again.
But even if those brands are bought and restarted, the Hostess workers will not get
their jobs back.
“It’s been a very sad day,” Rayburn told CNN. “I think that this was just a
monumental failure on the part of everyone involved, and it was just the wrong
outcome.”
Hostess filed for bankruptcy in January, its second trip to bankruptcy court since
2004. It previously emerged from restructuring in 2009 after a four-and-a-half year
process. The company is now controlled by a group of investment firms, including
hedge funds Silver Point Capital and Monarch Alternative Capital.
Frank Hurt, president of the bakers’ union, called the liquidation “a deep
disappointment” but said his members weren’t the ones responsible, blaming the
various management teams in place at Hostess over the past eight years for failing
to turn the firm around.
“Our members decided they were not going to take any more abuse from a company
they have given so much to for so many years,” Hurt said in a statement late Friday.
“They decided that they were not going to agree to another round of outrageous
wage and benefit cuts and give up their pension only to see yet another
management team fail and Wall Street vulture capitalists and ‘restructuring
specialists’ walk away with untold millions of dollars.”
While approval of the bankruptcy court is needed before Hostess can start selling its
assets in liquidation, the company said production at all of its bakeries stopped
effective Friday, and that stores will no longer receive products from Hostess
Brands after the final round of deliveries of products that were made Thursday
night.
But products that are already in stores can be sold, and the outlet stores will remain
open for about a week to sell the products they already have. Hostess had annual
sales of about $2.5 billion. The company said it had been making 500 million
Twinkies and 127 million loaves of Wonder Bread annually before Friday’s
shutdown.
Its bread brands, including Wonder Bread, Nature’s Pride and Butternut, make the
company the No. 2 bread baker in the country, according to Symphony/IRI Group.
Bimbo Bakeries, maker of the Arnold and Stroehmann brands, is the No. 1 bread
baker.
The company had given a 5 p.m. ET Thursday deadline for the bakers to return to
work or face a shutdown of the company.
Related: The history of labor battles at Hostess
In September, membership of one of its major unions, the International
Brotherhood of Teamsters, voted narrowly to accept a new contract with reduced
wages and benefits. The Bakers’ union rejected the deal, however, prompting
Hostess management to secure permission from a bankruptcy court to force a new
concession contract on workers.
The Teamsters union, which represents 6,700 Hostess workers, issued a statement
blaming mismanagement by Hostess executives for the company’s problems. But it
also was critical of the decision of Bakers’ union, although it did not identify the
union by name.
“Unfortunately, the company’s operating and financial problems were so severe that
it required steep concessions from a variety of stakeholders but not all stakeholders
were willing to be constructive,” said Ken Hall, the Teamsters’ Secretary-Treasurer.
“Teamster Hostess members, based on the facts and advice from respected
restructuring advisors, understood what was at stake and voted to protect all jobs at
Hostess.”
The new contract cut salaries across the company by 8% in the first year of the fiveyear agreement. Salaries were then scheduled to bump up 3% in the next three
years and 1% in the final year.
Hostess also reduced its pension obligations and its contribution to the employees’
health care plan. In exchange, the company offered concessions, including a 25%
equity stake for workers and the inclusion of two union representatives on an eightmember board of directors.
First Published: November 16, 2012: 7:28 AM ET
Share
Corporate News: Twinkie’s New Owners Will
Shun Union Labor
Feintzeig, Rachel. Wall Street Journal, Eastern edition
[New York, N.Y] 25 Apr 2013: B.3.
The company that bought the Twinkie, HoHo and Ding Dong brands
out of bankruptcy is gearing up to reopen plants and hire workers, but
it won’t be using union labor.
Hostess Brands LLC — Metropoulos & Co. and Apollo Global
Management LLC’s new incarnation of the baking company that
liquidated in Chapter 11 — is reopening four bakeries in the next eight
to 10 weeks, aiming to get Twinkie-deprived consumers the classic
snack starting in July.
Chief Executive C. Dean Metropoulos said the company will pump $60
million in capital investments into the plants between now and
September and aims to hire at least 1,500 workers. But they won’t be
represented by unions, including the one whose strike sparked the 86year-old company’s decision to shut down in November.
“We do not expect to be involved in the union going forward,” Mr.
Metropoulos said in an interview Wednesday.
Hostess Brands Inc., the company that filed for bankruptcy protection
in January 2012 and eventually sold off its brands and plants to
several buyers, was once powered by 19,000 workers, 15,000 of
whom were represented by unions. The company’s largest union, the
Teamsters, had agreed to a new labor contract. But the second
largest, the Bakery, Confectionery, Tobacco Workers & Grain Millers
International Union, launched a work stoppage after the company
imposed new labor terms.
A Teamsters spokeswoman declined to comment. A spokeswoman for
the bakers union couldn’t be reached Wednesday.
In February, before the $410 million sale to Metropoulos and Apollo
was finalized, the bakers union’s president, David Durkee, expressed
confidence that his thousands of out-of-work members would find
opportunity at the Hostess facilities once the new owners reopened
them.
He said the only way for the brands to have a “seamless restart” would
be to hire back unionized bakers. “Only our members know how to get
that equipment running,” he said.
But Mr. Metropoulos and his son, Daren, the co-CEO of Pabst Brewing
Co. who is also heading up the reborn Hostess’s marketing strategy,
expressed confidence they would be able to find skilled, nonunion
workers near the four plants, which are in areas with high
unemployment.
The new Hostess is firing up plants in Columbus, Ga.; Emporia, Kan.;
Schiller Park, Ill.; and Indianapolis, Ind. It also is considering whether
to reopen a fifth plant it purchased, in Los Angeles. Previously, the
Hostess products that Metropoulos and Apollo bought were made at 11
plants, but the elder Mr. Metropoulos said those plants were running at
less than 50% capacity under the old model. The new Hostess plants
will run at 85% to 90% capacity, making the business “as efficient as
possible,” he said. The new company expects total capacity to be back
to where it was before Hostess’s shutdown by September.
The new Hostess plans to use third-party drivers and an outside sales
organization. It will also switch distribution models, delivering Hostess
Twinkies and Cup Cakes directly to supermarket warehouses instead of
individual locations.
“Ultimately, the consumer will be getting fresher products sooner
through this model,” Daren Metropoulos said.
The company also plans to increase distribution to convenience stores
and dollar stores and to consider new products.
(c) 2013 Dow Jones & Company, Inc. Reproduced with permission of
copyright owner. Further reproduction or distribution is prohibited
without permission.
Permanent R eplacements and the E nd of Labor’s
“O nly True Weapon”
John L ogan
U niversity of California-Berkeley
Abstract
This article analyzes the origins and impact of one of the most powerful antiunion weapons
used by A merican employers during the past four decades: the right to use and threaten to
use permanent replacement workers during economic strikes. It examines the policy debate
over replacements in the 1930s and 1940s, the increasing use of permanent replacements in
the 1970s and 1980s, the growth of a powerful and sophisticated “strike management
industry,” and the unsuccessful efforts of organized labor and its political allies to amend
the National Labor R elations A ct to outlaw permanent replacements. The article
concludes with a brief discussion of the relationship between the “striker replacement
doctrine” and declining strike levels in the postwar decades.
“The right to permanently replace,” writes former National Labor Relations
Board (NLR B) chairman William G ould, is the “right to use nuclear weaponry
in the arsenal of industrial warfare.” 1 A s G ould suggests, the use and threatened
use of permanent replacement workers during economic strikes has been one of
the most devastating antiunion tactics used by A merican employers in recent
years. It has allowed hostile firms to defeat numerous strikes, undermined
unions during contract negotiations, provided powerful antiunion propaganda
during organizing campaigns, and enabled firms to instigate strikes, then
recruit permanent replacements as a means of unloading unwanted unions.
The origins of “management’s big gun” 2 are found in the 1930s, several
decades before the issue became a major concern for unions. But important
changes in the economic environment, gradual changes in the law, the emergence of sophisticated “strike management” firms, and a shift in the balance
in power in labor-management relations over the next few decades set the
stage for a significant intensification in management opposition to unionization,
including an increase in the use and threatened use of permanent replacements.
The efforts of organized labor and its political allies to change the law on permanent replacements have all ended in defeat. In recent years, strike levels have fallen
to a postwar low, in large part due to workers’fear that they will be putting their jobs
on the line in any work stoppage (see Table 1).3 A nd with companies making
increasingly elaborate and extensive strike preparations, under the right circumstances, practically any group of employees can now be replaced. In the early
1990s, U nited Mine Workers president Richard Trumka warned that without a
ban on permanent replacements, unions would “almost certainly lose their only
true weapon––the right to strike. Without that weapon, organized labor in
A merica will soon cease to exist.” 4 Trumka’s words may yet prove to be prophetic.
International L abor and Working-Class H istory
No. 74, Fall 2008, pp. 171 – 192
# 2008 International Labor and Working-Class H istory, Inc.
172
ILWCH, 74, Fall 2008
TA B L E O N E
1. O rigins of the Striker Replacement D octrine
Why then, does U S law allow the permanent replacement of economic strikers?
Previous analyses of the striker replacement issue have mistakenly suggested
that the Supreme Court’s 1938 MacKay decision,5 which established employers’
legal right to hire permanent replacement, was the first time that legal status of
replacement workers under the National Labor Relations A ct (NLR A ) was
debated. A long with the issue of whether unions and management were
required to produce written agreements as a result of collective bargaining,
state regulation of unions’ and management’s economic weapons––including
the status of replacement workers––was one of the most vigorously debated
issues in the years prior to the enactment of the NLR A . O ne member of the
National R ecovery A dministration era labor boards who would also serve on
the first NLR A -era labor board, E dwin Smith, believed that the new law
restricted employers’ right to hire permanent striker replacements. If at any
time during a work stoppage, economic strikers indicated to the employer
their willingness to end their strike and return to work, Smith insisted, the
employer “must receive them back, displacing [their replacements]. … The
utility of the strikebreaker to the employer has ended. A s a tool the strike
breaker can be discarded––as an employee, dismissed.” 6 Thus, Smith argued,
employers could hire replacements to continue production during strikes, but
they could not legally retain replacement workers beyond the duration of a
current strike.
Several commentators recognized the potentially disastrous consequences
for unions and collective bargaining of allowing employers to use this potent
weapon. In early 1936, just a few months after the enactment of the new law,
NLR B attorney D aniel Shortal wrote to a fellow board lawyer that the labor
board must outlaw permanent replacements––even in the absence of unfair
management practices––or risk allowing employers the opportunity to undermine the entire purpose of the law:
Permanent R eplacements and the E nd of Labor’s “Only True Weapon”
173
To hold that in strikes, not caused by an alleged unfair labor practice, where the job
of a striking employee had been filled before the striker signified his willingness to
return to work, it would not be a violation of the A ct to retain the new employee
and to refuse to replace them with the striker would open up a most prolific field
for hostile employers to circumvent the true purpose of the A ct. This could…
permit employers to practice many different forms of interference and coercion
by the use of strike-breakers immediately after the commencement of a strike.7
A few months later, Shortal elaborated on what he saw as the grave dangers
associated with legalizing permanent replacements:
If the theory of giving permanent status to an employee who was called into
replace a man on strike is followed to its logical conclusion, it would destroy all
unions, abolish all efforts at bargaining and emasculate all strikers. … Such
a practice would put before an employer a temptation, perhaps too great to
withstand. …A n argument “reductio ad absurdum” can be advanced whereby
an employer one hour after a strike, and possibly even by strike-baiting, by
hiring new employees, could render the administration of the A ct anemic.8
But not all policymakers agreed with Shortal’s position on state regulation of
employers’ economic weapons, including the new law’s chief sponsor, Senator
R obert F. Wagner of New York. Wagner believed that it was “impossible to
prevent employers from exercising pressure upon strikes in the same sense
that we want to prevent them from exercising pressure upon free organization
and unionization of their workers. …The object of unionism should not be to
outlaw the exertion of economic pressure by either employer or employee in
the actual process of collective bargaining.” 9 Likewise, the NLR B’s first chairman, J. Warren Madden, believed that the NLR A outlawed certain unfair management practices, but having created this “nearer approximation of equality of
bargaining power, it leaves the parties to depend upon their economic power.
It does not require either side to be kind, or even considerate and mindful of
former happier relations. G ood morals might teach such conduct, but the law
has not undertaken to enforce it.” O n the specific question of whether an
employer must decline the option of hiring permanent replacements, Madden
stated categorically, “I see no such provision in the statute.” 10
Wisconsin schools labor arbitrator William Leiserson, chairman of the
National Mediation Board and a future influential member of the NLRB,
agreed that Madden was “entirely right in this matter. It seems to me very
strange,” Leiserson wrote, “that your Board should take any other position….
O nce the employees strike, the employer, of course, must discriminate against
the strikers and must try to defeat the strike. If in doing this he is to be
charged with unfair practices, the law is reduced to an absurdity.” 11 Within a
few years, a majority of the labor board agreed with Madden and Leiserson on
permanent replacements, especially after the appointment of another
Wisconsin school labor arbitrator, H arry Millis, as chairman of the NLR B in
174
ILWCH, 74, Fall 2008
1940.12 Millis and Leiserson were more responsive to employer and right-wing
attacks on the board. The critical test of board policy for them was whether
state regulation of employers’ and unions’ economic weapons––including the
use of permanent replacements––encouraged or impeded free collective bargaining. In the 1930s and early 1940s, they believed that, in the interests of promoting
free collective bargaining, the labor board should not regulate employers’ use of
permanent replacements. The manner in which employers have used and threatened to use permanent replacements since the 1970s, in contrast, has clearly
undermined the process of free collective bargaining.
The legal status of permanent replacements was finally settled by the
Supreme Court’s MacKay R adio decision in 1938. In O ctober 1935 the
Mackay R adio and Telegraph Company hired replacement workers to continue
operations during a strike over contract negotiations, and the union returned to
work. A fter the company reinstated all of the strikers except five union leaders,
the NLR B ruled that it had discriminated against the five men on the basis of
their union activism. When the circuit court overturned the reinstatement
order, the NLR B appealed the decision to the Supreme Court. In May 1938
ruling, the Court upheld the reinstatement of the five union activists but
stated that the company had not committed an unfair labor practice by hiring
permanent replacement workers. In an oft-quoted passage, the Court declared:
“It does not follow [from the NLRA ] that an employer guilty of no act
denounced by the statute, had lost the right to protect and continue his business
by supplying places left vacant by strikers.” 13
A lthough the decision upheld the board’s reinstatement order, the Court’s
Mackay case attracted considerable interest from employers’ organizations,
which immediately recognized the potential significance of the ruling. The
Chamber of Commerce pointed out that a “vital point” was that the strikers
had walked out concerning a dispute over terms of employment (i.e., an economic strike), not as a result of an unfair labor practice. Consequently, the strikers
were “not entitled to automatic reinstatement.” In a number of economic strikes
in the late 1930s and early 1940s, employers cited the decision to justify the permanent replacement of economic strikers. In a strike at the Johnson-Carper
Furniture Company––which the furniture workers’ union claimed would “determine organization of unorganized furniture workers in th …
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