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As cities across the state seek to demand a risk premium for grocery store workers, California’s grocery industry is backing down.
Kroger, which owns several supermarket chains, said Monday it would close two stores in Long Beach in response to city rules demanding an additional $ 4 an hour in “hero wages” for workers at the. grocery shopping during the COVID-19 pandemic. The stores scheduled to close are a Ralphs on Los Coyotes Diagonal and a Food 4 Less store on South Street, affecting 200 workers.
“This misguided action by Long Beach City Council goes beyond the traditional bargaining process and applies to some, but not all, workers in the city’s grocery store,” Kroger said in a statement. “The irreparable harm that will be caused to employees and local citizens as a direct result of the City of Long Beach’s attempt to pick winners and losers is deeply regrettable. We are truly saddened that our associates and clients are ultimately the real victims of the actions of City Council.
The announcement comes as the Los Angeles City Council plans to vote on Tuesday on whether to pursue a similar order demanding a $ 5 an hour increase for grocery store workers.
Long Beach served as a test for the risk premium, as several cities in California, including San Jose and Oakland, are also considering increases for frontline workers. The Santa Monica City Council voted last month to demand a “hero’s pay” for grocery store workers, and the Los Angeles County Supervisory Board has come forward with a similar proposal.
Kroger’s spokeswoman Vanessa Rosales said in an email that approving risk premium warrants for grocery store workers in other cities could lead to more store closings. Rosales said she couldn’t share details of how the extra pay affected the profit margins of the two stores, but said both were already “underperforming” even before the start of the business. Long Beach ordinance Jan. 19.
The Ohio chain said it spent $ 1.3 billion to reward workers and implement safety measures throughout the pandemic.
“Kroger’s decision is unfortunate for workers, buyers and the company,” Long Beach spokesman Kevin Lee said in a statement. Lee acknowledged that the two stores “have been struggling for a long time” and said the city’s workforce branch will help affected employees access unemployment insurance benefits, emergency health care coverage. , funding for retraining, skills development and job placement.
The California Grocers Assn., Which represents approximately 6,000 grocery stores across the state, opposed Long Beach’s efforts to raise wages, filing a lawsuit against the city in federal court last month. Last week, U.S. District Judge Dolly M. Gee denied the trade group’s request for a temporary restraining order to stop enforcement of the order before a court can hear the case, and set a hearing on February 19 on the association’s preliminary injunction request. to stop the law while the case is pending.
The ordinance, which will last at least 120 days, applies to chain stores with 300 or more workers nationwide and 15 employees per city store, who devote 70% or more of their business to selling. retail food products.
Ronald Fong, president of the California Grocers Assn., Argued that the measure was selective, designating grocery store workers for a pay raise even as others – including nurses, paramedics, employees of restaurant and public security officers – work on the front lines. Fong also said the order did not require the largest grocery retailers, including Target and Walmart, to pay the additional $ 4. Target has confirmed that due to its grocery sales, Long Beach’s proposal does not include its three area stores.
“You’re basically asking for a 30% increase, which puts grocers in a position to make tough decisions,” Fong said. “Every business is worried about this.”
Fong said the association will take legal action against the city of Los Angeles and other local governments if they adopt similar rules.
Long Beach Councilor Mary Zendejas, who sponsored the Long Beach Compensation for Risk Ordinance, said on Monday she was “incredibly disappointed” to learn that Kroger was planning to close two Long Beach stores , especially since the Food 4 Less store serves low-income people. residents.
“It is unacceptable that instead of doing the right thing, Ralphs and Food 4 Less respond with lawsuits and retaliation against the heroes of Long Beach,” she said in the statement.
It is “particularly shocking,” Zendejas said, that Kroger insists he cannot afford to pay Long Beach’s temporary risk premium order, given that the company’s revenues in the third quarter jumped nearly $ 2 billion from 2019 to 2020.
Zendejas said she was encouraged at the start of the pandemic when grocery stores offered heroic pay to employees. Many have since ended these programs, even as the health crisis has worsened, she said.
“Grocery store workers go there every day and risk their lives by being exposed to the virus,” Zendejas said in an interview last week. “Grocery stores are booming in their industry, they are making profits, record profits, off the shoulders of their employees, and they are unwilling to share the profits with them.
Neil Saunders, analyst at GlobalData Retail, said high-performing locations should be able to absorb an additional $ 4 in salary for their employees, but for weak stores, a company like Kroger could easily refer to pay-at-risk as ” last nail in the coffin. “Because the grocery industry operates on low margins, a significant pay rise is” definitely something that will erode bottom line, “he said.
“Businesses don’t like being told what to pay, and this can easily lead to conflict between the politicians who set these rules and the companies who have to pay,” Saunders said.
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