Sunday's expected ratification of a new four-year labor contract means the three largest supermarket chains in Southern California can turn their attention back to making money which they've been doing successfully since the last labor dispute in 2003-2004.


The retailers Albertsons, owned by Supervalu Inc.; Ralphs, owned by Kroger Co., and Vons, owned by Safeway Inc. were bound to keep details of the agreement confidential until union members voted on it. Likewise, the seven unions under the United Food & Commercial Workers banner didn't reveal the particulars, but recommended a "yes" vote to their 63,000 members.


"While we cannot go into specific detail," said Mike Shimpock, spokesperson for the Southern California Grocery Workers, "we can say that it includes fair wage increases and significantly improves health care benefits."


The deal appears to be a victory for the union because of a partial repeal of the two-tier system instituted after the disastrous four-month strike in 2003-2004. The two tiers refer to separate groups of workers: veterans who received higher wages and health care, and new workers who received less money and coverage.


So why did supermarkets give back spoils from the 2004 battle?


"I don't think they had a choice. A lot of excellent employees left the business because of the strike," said Phil Lempert, a food industry analyst and owner of Supermarket-Guru.com. "It doesn't surprise me it was settled. It should never have gotten this far, especially considering the last strike."


Alec Levenson, a professor at the Center for Effective Organizations at the USC Marshall School of Business, said that history shows two-tier employee systems rarely function. "The incumbent workers, usually union, say, 'We'll put up with it in the hopes things will turn around.' The company hopes that over time, as the incumbents leave or retire, the new wage structure will become universal. But it's typically never a happy solution for the long term," he said. "It becomes a growing source of discontent. So it's not surprising that when the next round of negotiations comes around, people say this isn't working."


The 2004 strike cost the union, too, because a good percentage of its members left the business. For the stores, the strike forced loyal customers to shop at competing stores and a significant number have not returned. With that history in mind, the downside of aggressive negotiating loomed large for both sides. "If you take a look at the potential of losing more customers and employees, it would have been a huge mistake," said Lempert.

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