2016 SOI: Labor Pains

Organized labor and grass-roots coalitions could soon go after c-stores. Are you ready?

By 
Mitch Morrison, Vice President & Retail Executive Platform Director, Winsight

“Fight for $15” is about a major transition in the labor landscape, according to Joe Kefauver.

The Democratic Party adopted it as part of its platform this election season. Sen. Bernie Sanders supports it, though front runner Hillary Clinton feels it’s perhaps too high.

We’re talking about $15 minimum wage, fueled by disgruntled workers and supporters of McDonald’s and reinforced in legislation recently passed from California to New York and a wave of cities in between.

Four years ago, it was Occupy Wall Street and the 99% movement that pervaded during the Obama-Romney contest. But this year is different.

In 2012, the loosely knit group of disenfranchised activists seemed mostly cordoned on the liberal fringes within the Democratic Party. In this year’s topsy-turvy environment, main stream, establishment Republicans are out of the running and the party’s front runner speaks in populist tones about the American worker. Meanwhile, Sanders, an avowed socialist Democrat preaching class warfare and political revolution, continues to vex Clinton.

What’s going on? And what does any of this have to do with the convenience-store industry?

The so-called “fight for $15” is less about the specific dollar amount than it is about a dramatic transition in the American labor landscape, said Joe Kefauver, managing partner of Orlando, Fla.-based Align Public Strategies and former vice president of public affairs for Wal-Mart.

It wasn’t long ago that the market shuddered over declining manufacturing output. Yet in the first quarter of this year, gross domestic product was down slightly and there was barely a flinch in the markets.

“We didn’t have a lot of good economic news, yet the market didn’t respond,” Kefauver said. “The old economy [of manufacturing] can have a bad quarter or two and no one will notice.”

The New Labor Wars

So as the economy shifts with increasing speed to one of service, battles between labor and corporate have moved to the retail and fast-food arenas, with organizers pushing for wages to climb to historic levels in the manufacturing sector.

And with the gap widening between the haves and have-nots, much of corporate America is on the defensive. Scores of prominent companies, including Wal-Mart, Target and McDonald’s, have embraced voluntary increases in starting pay for front-line workers.

“The old economy [of manufacturing] can have a bad quarter or two and no one will notice.”

But that may not be enough. Workers are organizing in formal and informal ways to challenge existing structure, Kefauver said. Specifically:

SEIU: The Service Employees International Union is reported to have spent $20 million in its campaign to have the minimum wage raised to $15—more than double the $7.25 federal figure.

Battle at the ballot: Even if labor loses on minimum-wage increases in a state or citywide referendum, the defeat is, in many ways, a victory because it stirs a rallying cry to align a variety of groups.

“It serves as a loss leader,” Kefauver said, referring to a retailing ploy familiar to operators willing to give up margin on a popular item to draw more customers and drive greater market-basket opportunities. Politically, loss leaders rally around a popular issue to garner greater support on a broader agenda.

“Even if they fail on the ballot, they have delivered a winning narrative,” he said, citing that income inequality and wage stagnation are sweeping both political parties.

It’s not about D.C. anymore: If the largely conservative c-store leadership is counting on Congress to rein in liberal excesses, they should think again. The ground wars are taking place at the local level: in cities, counties and states. “You’re going to see more and more wage initiatives at the local level, because the business community is poorly set up at the local level,” Kefauver said.

Citing NACS as an example, he said the trade association is effective in influencing national policy relevant to the convenience community, but that it is not geared to tackle local or state issues. For their part, many of the state associations often are more reactive than proactive in fighting legislative battles.

Focusing on franchisees: Compliance is becoming a growing concern within the franchise business world. Last year, New York Attorney General Eric Schneiderman launched a crackdown against Papa John’s franchisees, accusing them of underpaying workers and cheating them out of overtime pay. He also took aim at the parent company over allegations that it allowed the wage theft to occur.

In November, one franchise owner went to jail and was ordered to pay $230,000 in restitution to workers for unpaid wages.

“You’re going to see a lot more of this narrative,” Kefauver said. “Where our Achilles’ heel is is on the compliance piece,” including break time, labor scheduling and working holidays without getting receiving overtime.

“There’s an industry out there betting against us, hoping we’ll trip up for their political gain,” he said.

If you can’t beat ’em, go after their partners: In late March, a coalition of 50 organizations representing environmental, social justice and animal-welfare groups called on Olive Garden and its parent company, the $6.7 billion Darden Restaurants Inc., to take greater steps to improve both food sourcing and labor practices.

“It is clear there is a major gulf between the company’s rhetoric on strong animal and social welfare, workers’ rights and environmental protection, and the actual impacts of its food sourcing and labor-management practices,” the coalition said in a statement.

As part of the coalition’s Good Food Now campaign, activists have put pressure on Darden’s suppliers, Kefauver said: “There’s latitude to draw suppliers to put pressure on employers.”

As such, he urged merchants to audit their supply-chain relationships to ensure they partner with upstanding companies.

Wage boards: From the National Labor Relations Board (NLRB) to state-level compensation overseers, Kefauver cited the rise of wage boards in reviewing numerous sectors, from quick-service restaurants to movie theaters. “You’ll have your day,” he said of c-stores.

In the meantime, he said, the industry should develop a proactive narrative. “I’d be driving a national conversation on [wage and workplace] compliance, because we are very vulnerable in that space,” he said. “Being relevant on the local level means being a good neighbor, being integrated in the community.”

It’s about crafting a long-term strategy and sustainable relationships. “It’s not a transactional, one-time thing,” Kefauver said. “We’re got time, not much, to put our house in order.

“It’s a very different game,” he continued. “And if we don’t do it right, your business model will look very different in two to three years.”

And you won’t like it.