Los Angeles Private Equity Firm Squeezes Local Workers in West Chester

Employees of AdvancePierre Foods enter the West Chester plant on July 16 to demand better pay and working conditions. Photo: Mike Brown, C4AD.

by Mike Brown, mbrown.c4ad@gmail.com

Though employees are protesting stagnant wages and deteriorating working conditions at the AdvancePierre Foods plant in West Chester, they want the company’s majority owner in Los Angeles, Oaktree Capital Management L.P., a private equity firm, to hear them.

Employees say Oaktree is pulling the strings at AdvancePierre and is looking to sell the company. Fearing they were not being heard, employees asked the United Food and Commercial Workers Local 75 in March to help unionize workers at the plant on Princeton-Glendale Road. Employees say the company has illegally obstructed those efforts.

Carmen Cotto, a 28-year employee making $11 per hour, says she hasn’t had a raise in nine years. Employees say they were asked to make do with fewer hours as Pierre Foods, the precursor to AdvancePierre, emerged from bankruptcy in 2008 with financing from Oaktree. But when the company got back on its feet, employees say their earlier sacrifices counted for nothing.

“I wouldn’t be out here (protesting) if I didn’t need to be,” said William Brooks, a 25-year employee, at a July 16 rally in front of the West Chester plant. “And the reason I’m here is because there are employees here who deserve more. They have kids. They have families. They haven’t had a raise in all these years. And inflation and everything is going up, except our pay.”

In response to inquiries from C4AD, an AdvancePierre spokeswoman, Laura Phillips, emailed a statement saying, “We are hopeful that our associates in West Chester will continue to maintain their direct working relationships with us. Collectively, we will continue to increase local employment in the Cincinnati area, provide long-term job security for our associates, and continually improve our operations to ensure success both locally and in the industry.”

AdvancePierre supplies protein and sandwich products for school districts, the U.S. military, other food service providers, and wholesale food service distributors. At the West Chester meat processing complex, workers primarily make, warehouse, and ship frozen hamburger patties as well as pork and chicken products. The company, which operates plants in three other states, was identified as the region’s largest private company in 2012 with sales of $1.5 billion, in the 2013 Deloitte Cincinnati USA 100.

Employees of AdvancePierre rally in front of the food processing plant on Princeton-Glendale Road. Photo: Mike Brown, C4AD.
Employees of AdvancePierre rally in front of the food processing plant on Princeton-Glendale Road. Photo: Mike Brown, C4AD.

Private equity firms, like Oaktree, aim to get the highest financial returns possible for the firm and its shareholders—wealthy individuals, insurance companies, and pension funds. Private equity firms buy private companies the way individuals buy homes—that is, with a down payment and a mortgage loan. A key difference is that homeowners pay their own mortgages, whereas private equity firms require the companies they buy to repay the loan. And while homeowners work to reduce their mortgage and increase their equity, private equity firms seek to reduce their equity and increase the loan, which is the responsibility of the acquired company to repay. Private equity firms use other financial, tax, and operational strategies to maximize shareholder returns. They typically sell the acquired company in three to five years.

In 2013, Oaktree was the sixth largest private equity firm in the U.S., larger than Bain Capital, according to Pitchbook, based on assets under management.

Eileen Appelbaum and Rosemary Batt, co-authors of “Private Equity at Work: When Wall Street Manages Main Street,” write that lax regulation allows private equity firms to favor shareholder returns at the expense of others with a stake in the company—its suppliers, customers, creditors, and employees.

The managers of acquired companies like AdvancePierre, write Appelbaum and Batt, have been told to deliver the high returns these investors expect. “If they can deliver, they will be richer than they ever dreamed possible.”

Millions of American workers are employed at companies owned and controlled by private equity firms, according to Appelbaum and Batt.

Employees at AdvancePierre began their protests last year as benefits were rolled back and stricter discipline policies were introduced. In early 2015, employees say, the company increased the speed of the plant’s 10 production lines and reduced the number of workers per line.

In response to these changes, employees staged a slowdown and two sick-outs in February and March. After that, employees approached UFCW about unionizing workers at the plant. About 100 employees attended a union meeting in April, according to Ellen Vera, a union organizer with UFCW Local 75.

Organizer with United Food and Commercial Workers union engages a worker leaving the AdvancePierre plant in West Chester. Photo: Mike Brown, C4AD.
Organizer with United Food and Commercial Workers union engages a worker leaving the AdvancePierre plant in West Chester. Photo: Mike Brown, C4AD.

Employees also protested the company’s threat to fire a co-worker, Diana Concepcion, an eight-year employee who works as a line leader in production. She says the company threatened to fire her for using a false name in her work authorization documents, after company officials received an anonymous tip of a photograph of her on Facebook with a different name. Concepcion says she is actually being fired in retaliation for her support of UFCW’s efforts to organize workers at the plant.

Efforts to form a union in the workplace are protected by the National Labor Relations Board. In June, UFCW filed charges of unfair labor practices with the NLRB alleging, among other things, the company illegally searched and confiscated union authorization cards from employees. To hold an election to create a bargaining unit, UFCW must gather signed authorization cards from at least 30 percent of the employees it would represent.

“The evidence on PE’s (private equity’s) track record with unions is mixed,” according to Appelbaum and Batt. “While some PE firms have negotiated with existing unions, others have worked to intensify work, prevent unionization, and marginalize existing unions.”

The evidence on PE’s (private equity’s) track record with unions is mixed. While some PE firms have negotiated with existing unions, others have worked to intensify work, prevent unionization, and marginalize existing unions.

Eileen Appelbaum and Rosemary Batt

Union representatives estimate the company has about 750 jobs in production, warehousing, shipping, and maintenance at the West Chester plant, of which 50 to 100 are filled by temporary workers provided by a local staffing agency.

Temp workers help address peak production periods, according to Vera, but they also send a message to employees: “You can be replaced.”

At a rally July 16, employees entered the plant to deliver a letter demanding better pay and working conditions and to announce a one-day strike in support of Concepcion. Workers discovered a corporate memo posted in the building that outlined a new hourly wage approach to be implemented Aug. 30 and reflected in paychecks two weeks later. The new approach promised an increased pay rate for most employees and a decrease for none.

According to Vera, the company provided no details about changes in pay rates. She believes the lure of a pay increase is a tactic to undermine employees’ will to unionize.

Concepcion and other employees say the company has reduced paid time off that an employee can earn during a year from four days to three.

Also management added a discipline system that assigns points based on infractions such as tardiness, unauthorized absence, and unscheduled use of PTO. Ten points accumulated during a 12-month period will result in termination. Sonia Guzman of El Salvador, a nine-year employee in production, was concerned about her ability to schedule PTO in advance. Speaking through a translator, she said, “I don’t know ahead of time that I’m going to get a flat tire on the way to work, or if my child is going to get sick.”

While Cotto hasn’t had a raise in nine years, she is grateful the company still offers shared-cost medical, dental, and vision insurance, benefits that originally attracted her to the company in 1987. But, as a 28-year employee with a bad knee, she laments the withdrawal of parking spaces near the plant for workers with 20 years or more of seniority.

Cotto and Brooks fondly remember the Dinerman brothers, Ira and Robert, who owned the company when they started. The plant had a learning center, and the owners were known to all the workers. “They came looking for me after I’d been there a year,” Brooks remembered. “People said Ira Dinerman was trying to find me and I was wondering why, but it was just to congratulate me on my one-year anniversary.”

Brooks recalled that about 20 years ago, near the end of the Dinerman era, union efforts to organize workers failed. At the time, the workers said, “‘We don’t need a union.’” The Dinermans, said Brooks, “really cared about their employees. They made sure we knew who they were.”

In 1993, the Dinermans sold Pierre Foods to Hudson Foods, which sold it Tyson Foods, which sold it to management, who sold it to Madison Dearborn, which declared bankruptcy in July 2008. As part of the bankruptcy proceedings, Oaktree became majority owner in December 2008. Two years later, Oaktree merged Pierre with another company in its portfolio, Advance, to create AdvancePierre Foods.

Forbes.com reported in June 2014 that Oaktree had already recouped its original investment in AdvancePierre, by taking out roughly $290 million in dividends and redeeming its preferred equity in Pierre Foods. In February 2015, Reuters reported that Oaktree was interviewing investment banks to prepare for a sale of AdvancePierre. The company, which had outstanding debt of $1.3 billion, was valued at more than $2 billion.

AdvancePierre spokeswoman Phillips could not confirm reports that a potential sale of the company had been postponed due to a July 17 recall of 1.7 million pounds of frozen chicken from a company plant in Portland, Maine.

The company’s cash flow from operations was estimated to be in excess of $80 million in 2015, according to an April 2015 report by Standard & Poor’s Rating Services.

The state of Ohio has awarded three Job Creation Tax Credits to AdvancePierre. The most recent credit, valued by the state at $660,385, was awarded in April 2014 to support the relocation of AdvancePierre’s corporate headquarters from Mason to Blue Ash in exchange for commitments to create 43 jobs, retain 59 existing jobs, and invest $1.8 million in facilities.

The city of Blue Ash entered into an economic development agreement with AdvancePierre Foods in 2014, providing the company with a forgivable $50,000 loan to assist with its new headquarters in Blue Ash. In exchange, the company agreed create at least 102 jobs no later than one year from the date of the loan. Neil Hensley, the city’s economic development director, reports that the company has exceeded all the requirements of the agreement.

Sonia Guzman, employee of AdvancePierre, asks to be heard. Photo: Mike Brown, C4AD.
Sonia Guzman, employee of AdvancePierre, asks to be heard. Photo: Mike Brown, C4AD.

Cotto and Brooks say current management shows little interest in or respect for workers. Both said that the work is difficult, requiring standing for long periods in the cold plant and meeting high production demands. Cotto said that until about seven months ago, people were happy to come to work, but since the policy changes people are anxious and feel unappreciated.“They say you can like it (the changes) or the door is open if you want to leave,” says Sonia Guzman, who works in quality control.

According to several workers, current management has held meetings with employees arguing against unionization. “They said the union would take our money but do nothing for us,” said Guzman. “They said it would cost us the equivalent of 32 tanks of gas, two airline flights and two televisions.”

“I’m praying to God to have a union,” said Guzman.

Paul Breidenbach, pbreidenbach.c4ad@gmail.com, contributed to this story as a translator and researcher.