TORONTO - Loblaw Co. workers in Ontario have overwhelmingly voted to give their union a strike mandate if Canada's largest grocery chain doesn't back down from concession demands that it says are necessary to remain competitive against its non-unionized rivals.
Over 97 per cent of members of the United Food and Commercial Workers union, which represents nearly 30,000 employees at stores under names such as Loblaws, Zehrs, Real Canadian Superstores and Fortinos, have voted in favour of a strike.
Loblaw (TSX:L) says it must modify some of its existing agreements in order to stay competitive, as earnings have declined about five per cent from where they were five years ago.
Ontario is an extremely competitive market in which Loblaw faces challenges from Sobeys Inc., owned by Empire Company Ltd. (TSX:EMP.A), Metro Inc. (TSX:MRU.A), as well as Wal-Mart.
The strike vote came after talks between the union and Loblaw that were overseen by the Ontario Ministry of Labour broke off late last month.
"We haven't been able to make any headway," said Scott Penner, president of UFCW Local 1977, headquartered in Cambridge, Ont. His union says that unless Loblaw "adopts a more reasonable position," a strike might be inevitable.
Workers are frustrated over company proposals that would cut wages by up to 25 per cent, increase waiting times for benefits eligibility and reduce full-time jobs. Workers at those stores make between the minimum wage of $10.25 and $25 an hour, plus benefits.
"Their package to date has been entirely concessionary," Penner said. "So, take-aways across the board on different areas of the collective agreement and their workers' rights in a time period where employers are turning the corner and things are looking a little better."
"We think its not the time to be chasing people to take things away from them," he added.
But Loblaw says that it must increase efficiency to take on a growing number of non-unionized competitors, like U.S.-based retail giant Wal-Mart, which has been ramping up its focus on low-cost groceries.
"We are striving to reach an agreement that would enable the company to continue to meet the demands of today's highly competitive retail landscape," Julija Hunter, the company's vice-president of public relations, said in an emailed statement.
"In many contracts we pay 10 per cent more than competitors and have 15 per cent less flexibility. That's a real competitive disadvantage. That's not sustainable," Hunter said.
Loblaw had already asked employees to make concessions in a 2006 agreement as it converted conventional retail stores into discount stores, a move it said was necessary to cope with Ontario's increasingly challenging market conditions.
The union is also concerned that the company is attempting to impose availability-for-work rules on part-time workers that would make it difficult for them to hold another part-time job, or attend school.
But Hunter said the chain intends to achieve greater operational flexibility in order to run stores more efficiently and ensure that it remains as competitive as possible.
"From our perspective, flexibility is about having the right people in the right place at the right time to best serve our customers. We require flexibility to enable key colleagues to be in our stores when our customers shop, such as evenings and weekends."
Meanwhile, workers are seeking wage and benefit improvements as well as job security and Penner said the union is unlikely to accept a status quo agreement that would not increase wages.
"When you're turning a corner and you're generating fewer hours and generating more productivity, usually people expect to have some compensation for that," he said.
Next year, in Ontario, non-unionized workers will outnumber unionized employees for the first time in the grocery industry's history, Hunter said.
"With a significant number of unionized employees in Ontario compared to our competitors, it seems to us that the union may also want to consider the implications and the long-term impact on their membership of this growing trend of non-union employees at grocery retailers."
Robert Cavallo, a retail analyst at Mackie Research Capital Corp., said Loblaw needs to stand firm on some concessions to compete at a cost-effective level against "the 800-pound gorilla," Wal-Mart, where non-unionized employees give the company a competitive advantage.
"But, to be fair, there's also some internal issues and missteps in Loblaw's past that contribute to the earnings declines," he added, pointing to the chain's supply chain inefficiencies.
Loblaw is on track with plans to spend $1 billion this year on store renovations and infrastructure upgrades, with investments in technology and supply chain efficiencies. The chain is now three years into a renewal plan to resolve supply difficulties that had resulted in stock not reaching stores efficiently.
Stephanie Ross, a labour studies professor at York University, said the 97 per cent strike mandate given the union leadership sends a strong message to the company, and actually reduces the likelihood of a work stoppage.
"That tells the employer that the union is not willing to cave. And most of the movement in bargaining usually takes place between a strike vote and a strike deadline. It's the thing that breaks the log jam."
Members wrapped up the secret ballot voting at four union Locals representing 117 stores around the province Sunday night.
The parties began exchanging proposals in April and have been in a legal strike or lockout position since Saturday. Negotiations overseen by a government mediator are scheduled to resume next Monday.
Shares in Loblaw, a subsidiary of George Weston Limited (TSX:WN), fell 18 cents to $39.80 Monday on the Toronto Stock Exchange. George Weston stock was up $1.14 at $74.69.
