The sentence, which was handed down November 14, 2006, will see Ralphs Grocery Company pay $70 million in criminal fines and compensation. Money for compensation will be given to Ralphs' workers, the health benefit and pension funds, and unions that were affected by the lockout. In addition to financial sentence, Ralphs will also be on probation for three years.
In giving out the sentence, the judge said that Ralphs "exalted profits" and had a "win at any costs" attitude about the lockout.
Ralphs was indicted in 2005 for its part in a labor dispute that lasted four and a half months and affected approximately 70,000 grocery store workers. After Ralphs locked out union workers it illegally rehired some of the workers, giving them false names and security numbers and submitting false tax information to the Internal Revenue Service and the Social Security Administration.
On July 26, 2006 Ralphs pleaded guilty to "conspiracy, use of a false social security number, identity fraud, falsifying and concealing material facts in matters within the jurisdiction of the Internal Revenue Service and the Social Security Administration, and concealment of facts from an employee benefit plan."
Of the $70 million Ralphs will pay, $50 million will be put into a restitution fund which will be used to pay approximately 19,000 workers who were locked out during the labor dispute. Workers will receive approximately seven weeks of back pay each. Payment to employees will be administered by a neutral party. Additionally, the unions that represent the workers will receive compensation for the financial assistance they provided to workers during the lockout. Finally, trust funds will receive around $675,000 as reimbursement for unpaid contributions.
The other $20 million will be paid to the U.S. Government.
The labor dispute began on October 11, 2003, when workers at Vons supermarket chain went on strike. Ralphs, Albertsons and Vons had a secret agreement that Ralphs and Albertsons would lockout their workers in case of a strike against Vons. That went into effect on October 12, 2003. At first Ralphs continued to operate with management and temporary workers; however when unions stopped picketing Ralphs' stores on October 31, 2003, Ralphs saw an increase in business which its temporary employees could not manage.
In order to continue operating, Ralphs began selectively rehiring locked out workers under false names and false social security numbers. Federal law allows employers to lockout all union employees during labor disputes, however the law requires that either all locked out workers are rehired or all continue to be locked out. It is illegal to rehire only a portion of the union.
Individual charges against Ralphs' executives have yet to be laid in connection with the illegal hiring of employees. The U.S. Attorney's office expects to charge individual executives for their part in rehiring employees under fake names and allowing those employees to cash their checks at company stores.
Ralphs is a subsidiary of Kroger Co.
In order to be eligible for back pay, workers had to have been locked out by Ralphs and not crossed the picket line during the labor dispute. The amount of back pay received depends on each person's full or part-time status, other earnings made during the lockout, and how many people file claims.