Mid-Atlantic Brewing News August/September 2005

Labor Woes Beset Pennsylvania Regionals

By Rich Wagner

It's been a long, hot summer so far for labor-management relationships at two Pennsylvania regional breweries. Just as workers at the Lion brewery in Wilkes-Barre were returning to work after a month-long strike, a story broke that the Pittsburgh Brewing Company was trying to divest itself of its obligations to honor workers' pensions in order to remain in business. The outcome at the Lion was the acceptance of a three-year contract, while the outcome for workers in Pittsburgh remains uncertain

Walk-out in Wilkes-Barre

On June 1 in Wilkes-Barre, nearly 100 members of Brewery Workers Local 367 rejected management's last contract proposal and voted unanimously to strike, the first such job action in sixteen years. On the first day of the strike uniformed guards with cameras were brought in from Special Response Corp., a Maryland-based company whose website bills itself as "North America's most trusted specialist in protecting personnel and property during strikes, labor disputes and other potentially dangerous workplace situations." 

The company had already hired 30 part-time, non-union summer workers, which union officials said was normal, but for the first time it hired 14 replacement workers right off the bat and advertised for more, a move CEO Chuck Lawson said was an "extremely difficult decision." Others said management was out to bust the union. Striking workers received certified letters saying their medical benefits were being canceled, although they could temporarily continue coverage by paying out of pocket. They were also invited to come back to work under the terms of their expired contract. The company refused to meet with union officials and would speak only with the union's attorney.

The average brewery worker at the Lion was earning around $17.00 per hour, and the union was willing to go along with a medical co-pay provision but the company wanted to impose a $1,000 deductible and make workers responsible for any increases in premiums. In addition, management wanted to eliminate family coverage for new any new workers.

The strike lasted four weeks, during which time, picketers were joined in solidarity by members of eight other unions. At one point five police cars and four mounted police were called in to arrest the head of the Painters' District Council for blocking traffic from crossing the picket line.

Finally on Monday, June 27 both sides returned to the bargaining table. Management gave up their proposed $1,000 deductible and the union agreed to the co-pay. Wages and pension plan contributions were raised by ten cents per hour and workers approved a three-year pact on Wednesday, and returned to work July 1.

Pension Problems in Pittsburgh

The same day brewery workers settled their strike in Wilkes-Barre the Pittsburgh Post-Gazette reported that Pittsburgh Brewing Company had filed a claim in April with the federal Pension Benefit Guaranty Corporation stating that it needed to drop its pension plan in order to survive.

Vice Chairman Joseph Piccirilli denied reports that the company was going out of business and told Pittsburgh's CBS affiliate KDKA he was protecting jobs by investing in the company's future. He said that in order to remain solvent, the company needed to borrow $5 million for capital improvements and couldn't honor its obligations to the employees pension fund.

While most companies file for bankruptcy to get out from under their pension obligations, Piccirilli said that Pittsburgh Brewing Company would not emerge from bankruptcy as an operating company and that vendors had warned they would not extend credit if the brewery filed for bankruptcy protection.

Despite recent gains from their innovative aluminum bottle which has had the brewery scrambling to meet demand, Pittsburgh Brewing's financial woes are legion, a situation management blames on previous owners. When Piccirilli organized a group of investors in 1995 they purchased the company at a bankruptcy sale for $31 million, including $18 million of debt.

In making their case with PBGC, the company listed losses of $1.2 million over the past three years. Despite $1 million in cost reductions and elimination of $4.6 million of debt, the pension fund has a deficit of over $5.5 million which has been exacerbated by the fact that the company hasn't made its $455,000 quarterly contribution since October and will be unable to make the next two payments.

Not mentioned in documents filed with PBGC were the $2.5 million owed to Pittsburgh Water and Sewer Authority for long-overdue bills, and tax liens incurred for failure to pay unemployment compensation taxes amounting to over $120,000 per quarter.

Piccirilli stated that eliminating its obligation to the pension fund, will make it possible for the company to get the money for the capital improvements and keep the brewery going. Improvements include replacing a 65-year old steam boiler that does not meet environmental standards and will accrue an additional $300,000 in fines within the next eighteen months, and replacing the company's 45-year-old keg line.

This case may seem miniscule compared with the $23 billion deficit the PBGC has assumed from unfunded pensions of airlines, steelmakers and other troubled companies, but the fate of over 500 current workers and retirees of Pittsburgh Brewing Company hangs in the balance.

Information for this article was gleaned from Wilkes-Barre's Citizens Voice and the Pittsburgh Post-Gazette.