Tactic to Win Concessions : Egg City Chapter 11 Bid Pressures UFW

Egg City, the world’s largest chicken ranch, has filed for protection from creditors under Chapter 11 of the Federal Bankruptcy Code, largely to pressure United Farm Workers members to accept pay cuts at the Ventura County ranch, company lawyers said Monday.

Labor law experts said Egg City’s filing marked the first time a California agricultural employer has sought bankruptcy court protection to win wage concessions and possibly to nullify its obligations under a union contract. The case also reflects the building tension in the long-term dispute between management of the 300-acre ranch outside of Moorpark and the UFW over one of the union’s biggest contracts in California.

The Egg City filing was made late Friday in Federal Bankruptcy Court in Los Angeles under the business’ formal name, The Careau Group. It listed assets of $21.5 million and liabilities of about $24 million, said Arnold Kupetz, an Egg City lawyer.

2-Year Wage Freeze

Lawyers for Egg City, which previously sought a two-year wage freeze at the ranch, said a new contract proposal will be submitted to the union shortly. The plan would cut wages of about 240 union workers to bring them in line with those of the ranch’s competitors, all of which are non-union. Egg City’s management staff of about 40 people would not be affected by the offer.

If the union rejects the proposal, company lawyers said, Egg City will ask the bankruptcy court to free it from its previous union contract, which expired last September.

Even though the old contract expired, Egg City still is bound under California’s Agricultural Labor Relations Act of 1975 to maintain existing wages and working conditions, said Rob Roy, an Oxnard lawyer handling Egg City’s contract negotiations.

The use of a bankruptcy filing to win contract concessions is reminiscent of a precedent-setting tactic used by Continental Airlines in 1983. The airline successfully used a bankruptcy court filing to cancel its union contracts and eliminate its unions, arguing that its survival was endangered by the contracts.

Distinctive Case

Labor law experts said the Egg City case would be distinctive in that it would challenge the ranch’s obligations under California’s 11-year-old farm labor law.

UFW attorneys said Monday that they did not want to comment on the bankruptcy filing because they had not seen it.

But Oscar Mondragon, general manager of the union’s horticulture division, charged that Egg City has refused to open its books to the union during negotiations to prove that the ranch needs concessions to stay in business. He further accused ranch officials of imposing unjustified rules that include limiting workers to one bathroom trip every two hours.

“We’re willing to talk about it and are not that insensitive,� Mondragon said. “We want the place to survive and the workers to have jobs, but we believe that the company is playing games with us.�

Tensions at the ranch have risen over the past month. Negotiations were halted, workers called a one-day strike and the UFW threatened to boycott stores carrying the ranch’s eggs. The ranch, citing its financial problems, laid off 68 employees two weeks ago.

Most workers at Egg City are paid according to such job classifications as chicken feeder and maintenance worker, earning from $6.07 to $7.69 an hour. Pay for egg gatherers, who make up about one-third of the work force, hinges on their productivity.

Egg City maintains that its labor costs are 30% to 50% higher than its competitors’ but won’t disclose its overall labor expenses. A University of California, Riverside, study found that labor costs for production, shipping and packaging average 7.5 cents per dozen eggs.

World’s Largest

Egg City, listed for years in the Guinness Book of World’s Records as the world’s largest chicken ranch, was founded in 1961 by Julius Goldman. The ranch is still widely known as Goldman’s Egg City, even though he sold his interest over several years during the 1970s to Kroger, the Cincinnati-based supermarket chain.

Richard Carrott, a 37-year-old former television actor, bought the ranch a year ago for an undisclosed price through Careau Group. He is Careau’s only shareholder.

Egg City was a key battleground for the UFW and the Teamsters Union during the mid-1970s when they competed to represent farm workers. It is the only unionized egg ranch in the state, according to UFW officials.

The ranch has about 3 million hens and produces more than 2 million eggs a day. Carrott has said it had annual revenue of about $40 million under Kroger and was losing $500,000 a month when he bought it. He said the losses have fallen since, but refused to elaborate.

Word of Egg City’s financial problems spread in recent weeks throughout California’s egg industry. One major cooperative for egg producers, Upland-based West Coast United Egg Producers, dropped Egg City as a member this year because it wasn’t paying its bills, according to the cooperative’s president, Bill Jasper.