Morning Call: Labor Dispute
Three years after strike, Just Born union workers have a deal—without their pension and without their vote
Union workers at Just Born have received a three-year labor deal, but it was the company’s final offer, and workers never voted on it.
“Having negotiated over several years, we have moved forward by implementing our last, best and final offer effective July 1," Matt Pye, Just Born’s senior vice president of sales and marketing, said in an email.
Workers’ pensions — a big sticking point that led to a September 2016 strike at the Bethlehem candymaker best known for its marshmallow Peeps — led to a long impasse and lack of a contract. As part of the final offer, the Bethlehem company is exiting a multi-employer retirement program, according to a source.
Pye confirmed that the company stopped making additional contributions to the pension plan.
“It is premature to discuss anything more on the pension at this time,” Pye said.
That move left about 40 longtime workers to take early retirement or resign in recent weeks, according to a source who wished to remain anonymous because he is starting a new job.
Had those workers stayed on, said the source, who was among those to leave, they would have forfeited their pensions. By opting for early retirement or resigning, they are losing a portion of their pensions — from $300 per month up to more than $1,000 per month, depending on the length of service, the source said.
Pye said Just Born presented its final offer in March to workers at its Bethlehem and Philadelphia manufacturing facilities, both of which belong to Bakery Workers Local 6 in Horsham, Montgomery County. He said neither contract was ratified, and both locations implemented their “last, best and final offer July 1.”
He said the company replaced the pension plan with a 401(k) retirement package “with a generous employer enhanced contribution.”
Pye declined to provide more information.
Hank McKay, president of Bakery Workers Local 6, declined several requests for an interview. Efforts were also unsuccessful to reach representatives at the headquarters of the Bakery and Confectionery Union or the retirement plan, Industry International Pension Fund.
About 400 union workers at Just Born walked off the job Sept. 7, 2016, principally over a disagreement with the company over pensions. The employees returned to work in late October of that year, but the union and company failed to reach an agreement on a contract, which led to Just Born’s recent, last contract offer.
The source said union workers did not vote on the deal to send company officials the “strongest message.”
Ed Easterly, a South Whitehall Township attorney whose specialty includes labor and employment law, said companies that present workers with a final collective bargaining agreement can implement it without a union vote if a company shows evidence of an impasse.
“The union’s refusal to vote on it is additional evidence that they do not agree to the terms,” said Easterly, who has not been part of the Just Born-union dispute.
In April 2018, Just Born lost a federal court appeal over its attempt to stop enrolling new employees into the pension without paying a penalty. Three years before that, citing the pension fund’s rising costs that left it with a “critical and declining status,” according to a notice by the fund, Just Born insisted it would stop the enrollment it participated in for decades.
Instead, it began diverting money into a 401(k) plan for new workers, though it said in 2016 that it would not eliminate the pension program for existing workers.
The federal appeals court ruled in 2018 that Just Born could either withdraw and pay the penalty for doing so, or remain and make the required payments under the plan. It said the company could not avoid both obligations.
Unlike companies that control their own pension funds, Just Born had been part of a multi-employer pension plan. The plan, which covers nearly 110,000 workers and retirees, took a serious blow when Twinkies-maker Hostess Brands closed and liquidated in 2012. That year, actuaries began determining the plan was in “critical” status.
In an April report to members, the pension fund listed about $4 billion in assets and nearly $8 billion in liabilities.
Employers participating in underfunded multi-employer pensions have paid increased contribution rates, but insolvency is still looming for the fund Just Born had paid into and others across the country, creating a danger that employees will never receive full benefits.
Congress convened a joint committee last year to seek a solution on the pension plans, but that bipartisan panel failed to recommend a solution. Democrats in the U.S. House of Representatives have proposed what’s known as the Butch Lewis Act, under which the Treasury Department would offer low-interest loans to help ailing pension plans.
Just Born, whose products include manufacturing about 2 billion marshmallow Peeps each year, decided not to appeal the 2018 federal appeals court ruling and continued to contribute to the pension. But that ended July 1.
Because of that, Just Born must pay a withdrawal penalty. In an opinion piece from April 2018, Just Born CEO Ross Born pegged that liability at an estimated $67.5 million.
Pye said the labor deal also includes an unspecified pay increase.
The number of Just Born workers is unclear. Since the 2016 strike, the workforce contracted, with about 325 production employees, down from 400 at the time of the walkout. An estimated 250 were in the union, according to a March 2018 Washington Post story. Pye declined to provide a current count.
Just Born has been in business nearly 100 years, most of them on Stefko Boulevard in Bethlehem. The 2016 strike was the first in more than four decades at Just Born. Local 6, which has represented Just Born employees since the 1950s, previously went out on a brief strike in 1972.