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Subway Joins Penny-A-Pound Program While Tomato Growers Feel The Pinch

Jim Prevor’s Perishable Pundit, January 22, 2009

With the announcement that Subway Restaurants has joined with many other quick-serve restaurants in committing to pay Florida tomato pickers an extra penny a pound over their normal wages, this movement seems to be gaining momentum again.

We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:

Les Winograd spokesperson
Subway Restaurants
Doctor’s Associates
Milford, Connecticut

Q: What drove Subway’s deal with the Coalition of Immokalee Workers (CIW)?

A: We strongly support farm workers’ rights, and reached agreement with CIW to further those rights. We did agree to pay the extra penny per pound. Basically, what CIW was asking us to do mirrored what was in our vendor code contract.

Q: In what ways?

A: Fairness to workers… allowing them to communicate with each other. We expect all our suppliers to follow workplace standards free from intimidation and provide provisions for fair wages and benefits, proper pay for working overtime, health and safety, protections against labor abuse, child labor and worker discrimination. Labor should not be exposed to undue risk or physical harm. Workers should not be exploited. That’s something we already had on the books. We were looking at this as an extension of what we were already doing.

Q: Yum Brands entered into a similar agreement with CIW back in 2005; McDonald’s agreed to the additional penny per pound for Florida round tomatoes supplied to its U.S. restaurants in April 2007. Burger King adamantly resisted, but eventually reversed its long-term opposition to the CIW demands, agreeing to the wage increase in May 2008 [see news conference here]. Whole Foods joined the bandwagon in September of 2008. So why did Subway wait until now? Reportedly, CIW workers were set to picket Subway stores in its Miami headquarters, and then in Connecticut. Did that imminent threat push the deal through?

A: The timing was very coincidental with the so-called protest. We had been monitoring the situation with other chains for awhile and had determined this was the route we were going to take. We came to that conclusion before they were going to announce picketing plans and what locations. We had been talking to them for quite some time.

Q: Despite the agreement, the issue still remains of how the Florida tomato workers will actually receive the extra penny per pound. The Florida Tomato Growers Exchange argues the growers should not participate in these CIW agreements because of various legal and logistical issues.

A: We have a purchasing coop that deals with that side of the business, an independent group funded by our franchisees.

The way we are set up, Doctor’s Associates handles the specifications for products and basically determines code of conduct for vendors. IPC, the purchasing coop, actually does the contracts with the vendors and the financial arrangements. The actual transactions go through IPC.

The IPC had a huge hand in the agreement. Our side of it is we agree with this.

If it affects our franchisees, we have to give it our sign of approval. If it has to do with the color and size of the tomato, it’s us. If it affects business in the actual purchasing of product, it has to do with IPC.

We’re always looking to do right by the consumer. Subway operates on the entrepreneurial spirit of the founders of the company. It was always the view of the founders to tread in areas new to us, to reinvent what we do, and to constantly improve the product, the conditions under which it is produced, and in how customers are served.

Q: Subway’s purchasing cooperative did not want to elaborate on the terms of the agreement, or how it would actually implement it to insure the additional money gets distributed to the workers. Why is that?

A: We had no problem agreeing to the deal. But it is a sensitive issue for a lot of companies. IPC may be reluctant to discuss details of the agreement because there are a lot of unresolved issues with how the money will get to the workers. It’s being worked on. I won’t say it’s impossible for it to happen, but it’s something the attorneys’ are pursuing with CIW. IPC wants a system in place to ensure the money gets passed on to the workers. It may be concerned that speaking to the media during legal negotiations probably could do more harm than good.

Mira contacted other chains that signed agreements with CIW to learn more. Following is an interview with one of these chain executives who offered to share background information, but preferred to remain anonymous due to the sensitivity of the topic.

Q: What good are these agreements between CIW and the restaurant chains if the additional penny per pound doesn’t end up in the workers’ pockets?

A: A long time ago, Yum Brands made the agreement with CIW to pay the extra penny per pound and got information from the two growers that had all the data on which pickers picked x amount of boxes that went to Yum Brands. These were very small checks — $1 to $5 dollars that probably weren’t even worth cashing for these people.

Then McDonald’s agreed to do the same, and growers said this is a form of unionization, negotiating on their labor. The Florida Tomato Exchange made sure no growers gave any information on how many growers picked what boxes. How do you get money to workers? You don’t. It’s being accrued for everybody forever. Until the growers either say, ‘We’re going to give you the information,’ or number two, the CIW would allow the money to go to community service like building hospitals or schools; the workers won’t see any benefit.

No one wants this in print, but many of the chains’ growers said from day one, ‘I’m not going to pay money to a particular worker making $10 an hour anyway.’ But growers understand workers are living in poverty, so they say they’ll give money to put into the community, like the Redlands Christian Fund. Growers want to do this. If CIW wanted to provide help to all workers, they would let the money be released to the community for different social services. Now they are pressuring the growers to give up their records; ”these guys picked this many boxes this week,” but good luck if the money gets to workers anyway. These workers pick four to eight hours a day, mostly four or five days, and in a season of seven or eight months, so you’re below the poverty line as the breadwinner of the family.

In actuality, the tomato growers are paying more hourly than we are to our restaurant workers; there is where the rub is, and the migrant workers often get housing, by the way.

Q: So why do these chains agree to CIW demands? Is it a public relations squeeze?

A: Do you give in and accrue a bunch of money and work it through, or do you fight them and get restaurants picketed and destroy business in a bad economy?

The growers argue legal issues with us getting involved in their labor. The Florida tomato growers are asking, ‘How can you tell us to pay an eight dollar-an-hour raise? I’m not going into your restaurants and telling you to do this.’ They’d like to see the word union, union, union attached to this scheme.

A lot of chains will copy our agreements. It’s costing our chain money, and it’s not a small number! Now we are at a disadvantage because we’re paying more. We’re at a competitive disadvantage versus Wendy’s or other chains that are not participating. Do you think people care about migrant workers when everyone is getting laid off? But our thought was, why fight it? Some people say it resembles extortion.

Q: Still, the CIW seems to have the media on their side from a public relations standpoint. And with migrant workers impoverished, the idea of refusing to pay an additional penny per pound could come across as heartless.

A: You hit the nail on the head. With proper marketing and a good PR firm, the Florida growers could have nipped this problem right off the bat and it would be a non-issue for everybody.

Mira then reached out to the tomato growers in Florida to get their take on the issue.

Reggie Brown, Manager
Florida Tomato Committee
Executive Vice President
Florida Tomato Exchange and
Florida Tomato Growers Exchange
Maitland, Florida

Q: What is your reaction to Subway’s agreement with CIW, as the biggest fast food user of Florida tomatoes?

A: After surviving the Salmonella Saintpaul crisis, and the grueling Senate hearings accusing Florida tomato growers of farm worker exploitation last April, this doesn’t seem that bad. It’s all relative.

It’s like extortion how CIW threatens to picket these chains if they don’t agree to sign.

Burger King refused to meet CIW’s demands for a long time, but caved in when a reporter intimidated [Burger King’s Vice President] Steve Grover’s daughter and she said he had used her blog to criticize the CIW. The scandal hit the press. That was the company’s motivation.

I still haven’t seen any documents related to these agreements. I have no knowledge of where the money is. Based on legal opinions we’ve obtained, there are several complex legal issues surrounding the receipt of those monies into our payrolls for the purpose of paying workers. We don’t know which worker picked which tomatoes for which chain.

The tomatoes don’t come with labels on them. The market and distribution systems, as FDA demonstrated so aptly this summer with the Salmonella Saintpaul outbreak, are complex, where the tomatoes go through at least two or three steps before their final destination.

Q: Don’t growers have to keep records on the amount of pounds their workers pick in order to pay them? Are you saying you have no way to identify the originating sources of a major chain’s tomatoes?

A: We have a system in place for picking, which is relatively effective in tracking how much people pick, but there is no way for tracking where that individual worker picked on an individual day and where it’s going to be sold.

If Subway or McDonald’s wants to supplement workers, we don’t know who they are. If we improperly pay workers for lack of correctly identifying the right workers, we have broken the law. We’re paying our workers with payroll checks. We know who picked what, but not where it ends up. The tomatoes could be put in a room for a week, and then sold to a re-packer, where they are resorted and then sold to a processor who slices and dices, who sends products to a distributor, who distributes to those restaurants.

How do I pay migrant workers 90 days in advance of that transaction being completed?

Even if the communication system is perfect, there is still a delay because there is no instant transfer of communication and compensation. Theoretically, the information and money comes back to the distribution center, packer, farm, and the grower is supposed to know who it is going to pay. Practically, the information comes back, if at all, long after the worker ahs been paid.

Q: What you describe sounds more like a logistical issue than a legal one?

A: The grower is thinking, ‘I pay every two weeks, on an hourly basis far in excess of the minimum wage, yet we’re being called upon to provide this compensation that is impossible to accurately distribute, but also has multiple legal problems. If I mispay someone, and knowingly mispay because I don’t know that individual worker picked for that chain, and someone files claims on behalf of all the 1,000 workers for not getting compensated correctly, it’s a crime, a serious crime.’

Under the Rico Act, the mafia crime act, if we are incorrectly paying workers knowingly, this is considered to be defrauding people, which is an actionable claim subject to jail time that could be made against these growers, filed months or years after it has occurred. We don’t know who picked for which chains, and we would be months late in being able to compensate, so the worker may or may not be working for us at that time, or the farm may not even be in operation at that time.

Why would anyone enter into that kind of arrangement knowingly? We think it’s impossible to meet the requirements of these agreements.

Q: In the case of Yum Brands, didn’t growers supply worker records to the chain so that the workers could receive the additional money?

A: A couple of growers supplied bulk payroll records and those workers received some prorate share of the Yum money, but there was no relationship of those workers having directly picked product going to Yum Brands; the only relationship between penny a pound and those workers was that it was a pool of money divided on a prorated basis to those workers working on those farms.

For purposes of explaining, say 10 workers picked tomatoes that went to Yum, and growers sent records of 100 workers, and the pool of money was paid to all 100 workers on a prorated basis. The 10 workers were mispaid, as were the other 90 workers, and knowingly, which is considered a crime.

Q: All this becomes so complicated when the chains enter into these agreements piecemeal. Isn’t the CIW simply fighting to increase the wages of Florida migrant workers across the board?

A: Let’s talk about issue of unionization. When an organization negotiates wage rates and presumes to represent workers and is recognized for that role, CIW is in effect a de-facto unionization of the workforce. There was never an effort or formal process for that workforce to express itself for or against a union. Yet these companies are entering into these CIW arrangements under state law without due process on the workers’ part. CIW claims to have 4,000 workers within its organization, but this is not really the case. They’re acting, walking and quacking like a union, but there is no union structure.

Q: Some would say the Florida tomato industry is undermining fair labor efforts. How would you counter this argument?

A: We continue to respond to the real marketplace for labor by competing with other employers for workers. Those other employers are industries such as construction, hospitality and service jobs like mowing lawns, all of which employ minimum skill labor. We are doing this by attracting them with good wages and good working conditions.

Capitalism in the marketplace will truly determine if we are able to attract workers. If you are a true believer in the economic system of free enterprise, then if we are not having a major labor shortage, it is reflected in the fact that we have the best wages. And as there is a scarcity of labor in the market, that’s why we continue to attract labor to harvest our crops.

A number of employers in the tomato industry have begun to use the guest-worker program that brings in workers to supplement current availability of domestic workers. We are not saying there is no shortage in the workplace, but we are proactively moving to address that issue with wage rates and guest-worker programs. I could make a strong case we’re one of the most progressive commodities in the country. Unfortunately, CIW has gone after our industry.

Q: By focusing on the hourly wage rates rather than annual compensation and other benefits, don’t you ignore the fact that most migrant workers are impoverished?

A: The hourly wage rate is the fundamental mechanism by which minimal skilled labor is attracted into the workforce. The nature of the seasonal agricultural labor force will not be changed by the penny-a-pound scheme. We are fundamentally seasonal employers; for months we employ workers who work for multiple employers over the course of the year.

Penny a pound is only attacking one industry and one part of the country, and that won’t change anything. In fact, it potentially unfairly handicaps that industry. At $12.46 cents an hour, go down the street and look at what other employers are paying. There is always a concern for what wages are, with minimum wage laws at state and federal levels.

Q: Why not mount your own public relations campaign to set the record straight?

A: Quite honestly, for the first four or five years, we didn’t do anything. Only in recent times have we focused efforts to respond.

Q: Your efforts have had little sway in staving off CIW’s ability to get signed agreements with the big restaurant chains.

A: CIW goes to the foodservice industry because they can absorb costs. The cost of product has a real bearing on product demand. As an example, look what happened in hurricane years when tomato prices soared and sales contracted. If we run up the cost of product for the foodservice industry, it will certainly stall demand. You just won’t see tomatoes in salads. Or the tomatoes will be imports.

When brand owners are threatened by boycotts, student pickets and campaigns by socially active groups throughout the country, the cost of agreeing to the penny a pound is certainly cheaper from a brand protection standpoint then any kind of an effort to refute inappropriate and inaccurate accusations hurled in the media, with no facts to back them up.

Q: What types of false accusations are you referring to?

A: There was one case in the last 9 or 10 years associated with a tomato company where that individual was indicted for human trafficking. After he served his time, he went to work at another company, was then identified by these activist groups and the company laid him off.

Q: Isn’t SAFE set up to protect against such abuses?

A: We have been very proactive in the tomato industry, working with tomato growers producing social accountability through SAFE. Steve Kirk, the new chairman of SAFE, has a long record of working on housing. He works with a group out of Homestead that builds and manages farm-worker housing throughout state, and has been an advocate of housing for many years.

Barbara Mainster, executive director of RCMA, remains on the board, and we picked up Ed Beckman, President, California Tomato Farmers, Fresno, California who’s now on the board as well, which gives SAFE a broader base. There is nothing to prevent SAFE being used by anyone wanting to have a third-party audit to test the veracity of employment and social aspects, and going into the direction of the whole sustainability effort.

There have been some situations where bad things have happened; bad people exist. The reality is that if the Immokalee group (CIW) creates a situation where the cost of that product is higher by 20 cents or 40 cents in today’s economy where low cost drives the market, they will drive the industry out of state and out of the country, unable to compete with imports from Mexico.

The tomato business in general is a pretty tough business. Going through what we did last summer with the Salmonella Saintpaul crisis, with profit practically down to 0… Even though we have been progressive in relation to safety of tomatoes, if you Google the industry 10 years from now, we’ll still be associated with Salmonella Saintpaul.

Q: News does propagate through the Internet rapidly and can hover in cyberspace indefinitely, whether accurate or not…

A: The strategy of CIW is to use the Internet to proliferate the myth that Florida tomato growers are enslaving workers, and it has refined it to an art. I argued our case to the media and in the Senate hearing that we were on the same side as CIW in our concern for migrant workers. The tomato industry has been targeted by this group.

The produce industry should be warned that there is nothing to prevent other groups to do the same to other commodities. CIW uses intimidation to bully brand owners, which is not helpful for the industry or the economy. Once slavery is hurled across the room, reasonable discourse goes out the window.

CIW’s strategy only works if it can make pretty outlandish allegations against an industry. The emotionally-driven issue of slavery, which has been the corner stone of its campaigning, is fundamentally wrong. The emotional connection is what drives its success. It basically says Florida tomato growers are slavers, and that has caught the social conscience of the country that opposes slavery as much as we do. CIW only succeeds if it paints our working conditions and wage rates as almost villainous. I would counter: Do we have a workforce and does it routinely return to employment as a measure of the true economic wage rate? Yes.

For this mythical image to continue to be propagated by (CIW) that we are some kind of unreasonable group of individuals is ludicrous. Look at what we’ve done with SAFE. We had worked at length to assure McDonald’s that their providers weren’t involved in activities claimed by CIW. McDonald’s brought in internationally known specialists to create SAFE. That program was created in conjunction with McDonald’s support and expertise.

The Florida tomato industry has been in the forefront of food safety guidance and auditing procedures, and it exercises complete transparency in turning over audit documents, as exemplified by the role the industry played in the Salmonella Saintpaul outbreak.

Q: Could you highlight ways the Florida tomato industry is addressing the new emphasis on social responsibility?

A: The Florida Tomato Growers Exchange, with McDonald’s assistance, made a great effort to create a third-party audit system, similarly structured to third-party audit systems around the world. We recognize this is the first step in a new journey. Everything in the SAFE program speaks to corporate social responsibility. All the effort has been acknowledged as a constant work in progress, and certainly goes beyond the minimum legal requirements in an effort to build a productive work environment for our employees that we value. SAFE was never intended or presented to be EurepGAP. We have a fundamentally robust regulatory environment that takes care of many of the issues EurepGAP addresses.

The tomato growers historically, currently and in the future will continue to support childcare, child education and other opportunities for farm worker children. We are aggressively improving housing and working conditions for farm worker families long-term.

The industry partners with organizations in these causes. We’ve worked with the Florida Fruit and Vegetable Association and cooperated with Catholic charities in building housing after hurricanes. Farmers are constantly providing land and facilities for workers, for childcare and child education on our farms. We have companies that have provided significant dollars for scholarship programs for college opportunities for migrant workers to improve their skill base so they’re not trapped and are able to gain skills and take advantage of new opportunities.

We feel SAFE has a mechanism to raise standards in the marketplace. SAFE structure provides a way to address problems if violations of the code are found, solve those problems and move on. I work with some very progressive people in the industry.

Q: In pursuit of raising worker standards, could you elaborate further on the legal obstacles to helping the restaurant chains meet their agreements to pay tomato workers additional wages?

A: We have numerous legal opinions telling us not to participate in these agreements between CIW and the restaurant chains. Despite comments to the contrary, we’ve made no announcement that there is a fine in the Growers’ Exchange for growers that do participate. We are simply a cooperative using good business practices to insure all business owners abide by their contractual obligations. Ag coops are owned and operated by their members. They are voluntary organizations. They are private businesses that operate under the terms and conditions created by their owners.

When multiple third-party groups, in fact competitors, establish terms and conditions of trade, there is a significant potential for anti-trust concerns. However, legal issues with labor laws related to employee/employer relationships are at the core of this issue. The issue of joint employment and unionization are at the core of this scheme.

In final response to this issue, where does the slippery slope end? We have no problem with Yum Brands, McDonald’s or anyone else supporting the farm workers with whatever trust funds or other benefits they wish to provide. That’s their business between them and the activists. We just choose not to be involved because of a lot of trip wires.

Q: But if the growers don’t participate, the additional money for the workers just sits in escrow, which doesn’t benefit anyone.

A: That money could be put into a foundation to serve the worker community.

We don’t oppose workers getting those resources, but have serious legal issues getting involved in that process. Some have suggested the penny-a-pound funds could be distributed by setting up storefronts where workers register claims with their pay stubs with the number of pounds they picked, but I’m not sure how this would work exactly.

Funneling money through foundations to provide help to the workers is another way.

This is one of those areas in which nothing is as it seems to be.

First, it is patently obvious that none of these fast food chains care a whit about giving a penny a pound to workers. If they did, they would apply the policy world wide and not just in Florida, and they would insist growers do it. Growers may scream and protest, but nobody will ever convince this Pundit that if McDonald’s insisted that each tomato picker be given a condo in Miami Beach and a pink Cadillac — and was willing to pay for it — that some grower would not be willing to support it in order to get the McDonald’s business. It is obvious that the chains allow CIW to declare victory, then put a penny a pound into an account because this is the easy path. They don’t take the next step of actually refusing to purchase from growers who don’t do this because they don’t actually think it is such a great idea.

Second, the growers have a thousand objections, but their real objection is that it is wrong to single out one particular production region for this treatment, and it tends to make that production region less competitive. The growers are right, because if the production is driven out of Florida, say to Mexico and the Caribbean, the workers will be paid less and will be less well off.

Third, the CIW has found a vulnerable pressure point, and we can count on other groups to use restaurants and retailers as the way to pressure production agriculture. Any one produce crop is not very important to these enterprises, and the cost of pickets and boycotts could be substantial. So the industry needs to do a far more effective job on the PR front.

Fourth, the PR will work better if the industry deals with two issues: A) Hourly compensation is just not that important in the scheme of things. The question is if someone is a migrant laborer in the produce industry, how much money can he earn? Obviously no matter what salary these workers earn during their time on the Florida tomato deal, the story has to include an industry-wide solution that includes income from their stint in Florida, Tennessee, Ohio, etc. We previously suggested the possibility of an industry organization that would hire the workers, give them health insurance, 401-K plan and arrange for their employment in different states and then would “lease” the employees to various worksites throughout the year. Then we could tell industry critics that these folks have year-round jobs with benefits at a livable wage. Perhaps we could even market the tomatoes with a Fair Trade-like program that speaks to employee compensation.

Fifth, we are all in favor of charity and, certainly, as we wrote here, the Redlands Christian Migrant Association is wonderful organization. But charity can’t be the answer; in fact the need for charity is proof of the problem. If one’s employees earn so little that they need charity, then the work is not really sustainable in our system.

Right now, things are tough and we suspect the focus on value will mean that people just want cheap tomatoes. Long term, though, it is not going to be acceptable to have jobs that people can’t make a living at on a year-round basis.

So the challenge will be two-fold: A) How to set up an industry structure so that the produce industry can be proud of the opportunities it provides its labor force, and B) How to set up trade relations so that taking these steps doesn’t price domestic agriculture out of business.

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