🎧 LEVER TIME: The Bank Panic of 2023

At This Jersey Factory, Pension-Backed Private Equity Takes On Union Workers

At a Refresco plant outside of New York City, KKR masters of the universe say that weekends come only six times a year.
At This Jersey Factory, Pension-Backed Private Equity Takes On Union Workers
Refresco workers outside KKR's office in New York City. (Image courtesy of United Electrical, Radio, and Machine Workers of America.)

At the outset of the COVID-19 pandemic in 2020, Refresco — a transnational corporation that produces and bottles soft drinks for major brands such as Tropicana and Gatorade — had a single response to its staff about the public health crisis unfolding at its Wharton, NJ plant an hour outside of New York City: show up to work.

According to the workers at the plant and their union, employees exposed to the virus were denied time off, the factory remained open despite a broader economic shutdown, on top of the 12-hour shifts the company required. (Workers say the company used the pandemic to justify longer shifts, while Refresco claims the new policy went into place prior to the emergence of COVID-19). Outraged, the predominantly immigrant workforce formed a union, winning their first election in June 2021 in what was one of the largest blue-collar union victories during the pandemic.

One year later, New York-based private equity megafirm Kohlberg Kravis Roberts & Co., also known as KKR & Co., became a majority owner of the company. Now, workers claim that under KKR’s control, Refresco has been dragging its feet on negotiating a first contract with the union and pushing for draconian provisions such as only allowing workers to take weekends off once every eight weeks. KKR’s business model, meanwhile, depends on the pension funds of unionized teachers, firefighters, social workers, and bus drivers.

The plight of Refresco’s nearly 250 workers exemplifies one of the biggest problems facing American labor today: Union workers are, often unknowingly, funding the war on themselves by financing union busting activities through their pension funds.

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Public pensions have nearly $5 trillion in assets, with more than $1.2 trillion of that in risky high-fee, low-transparency “alternative investments,” like private equity, hedge funds, and private real estate.

“Pension funds have repeatedly financed the interests of anti-union firms, even sometimes with the unknowing support of union trustees,” said Jay Youngdahl, a pension lawyer and former fellow at the Safra Center for Ethics at Harvard, “It’s time to put a stop to it. Refresco is just one of the latest examples, and certainly jarring due to KKR’s attempts at ‘ESG’ rebranding.”

Indeed, KKR states on its website, “We believe that thoughtful management of environmental, social and governance (ESG) issues is smart business and see it as an essential part of long-term success in a rapidly changing world. KKR is committed to investing responsibly by integrating material ESG considerations into our investment policy.”

In April of last year, KKR helped launch and aggressively marketed Ownership Works, an organization exploring shared ownership by employees. A few months later, KKR launched two ESG funds to market to investors like pension funds. Contrasting these efforts with the company’s resistance to a fair contract at Refresco, Anastasia Christman, a senior policy analyst at the National Employment Law Project, called KKR’s approach a “nod to worker democracy and giving workers democracy, while actually opposing worker democracy.”

In May, an inspection of Refresco by the federal Occupational Safety and Health Administration led to nearly $50,000 in fines against the bottling company, with OSHA finding violations for noise and air quality issues.

“Respect, Dignity, And Equality In Working Conditions”

For years, the top-down culture of overwork at Refresco’s plant in Wharton, New Jersey, has led to injuries, said César Moreira, an Ecuadorian immigrant to the U.S. who has worked at Refresco for nine years. “They have shown repeatedly that they don’t really care about the bodies and health of the workers,” said Moreira. “The accidents continue — we had a worker fall off a ladder just in the last few months.”

Such a culture was particularly evident in the early months of the pandemic in 2020, when workers became ill and found little respite from Refresco management.

“There were many of our fellow workers who were sick with COVID at the beginning of the pandemic,” said Moreira. “One of us was in the hospital for two weeks.”

The connection between overwork and injury is strong. A 2018 literature review of occupational health studies concluded, “Workers working long hours had a higher chance of experiencing occupational health problems.”

At Refresco, the long hours can lead to swollen legs that have not been properly treated, according to union complaints filed with the Occupational Safety and Health Administration. Some Refresco workers frequently work as long as 16-hour shifts.

In a statement provided to The Lever, Refresco stated that it had “exceeded government guidelines” for COVID-19 risk management “by providing our manufacturing employees with face masks in addition to other personal protection equipment before it became a recommendation or requirement,” and that “Refresco complies with all applicable labor laws.”

The conditions inspired workers to form a union.

“We began to meet, and we realized that only with a union would we have more power against the bosses,” said Moreira. “We are workers who want respect, dignity, and equality in working conditions.”

Refresco employees chose to unionize in their first National Labor Relations Board (NLRB) election in June 2021. The following May, they won a second union election ordered by the NLRB after Refresco complained that the previous vote had started five minutes behind schedule due to an NLRB official being late.

At the time of Refresco workers’ push for unionization, the company was owned by a Paris-based private equity firm, PAI Partners, and the British Columbia public sector pension fund. But one month after the 2022 rerun election, KKR bought a majority stake in Refresco in a $7 billion deal.

Now, a KKR fund — KKR Global Infrastructure Investors IV, according to the Private Equity Stakeholder Project — owns Refresco.

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“One Consecutive Saturday And Sunday Off Every Eight (8) Weeks”

While bargaining continues between Refresco management and the small and militant United Electrical, Radio, and Machine Workers of America (UE) union, documents obtained by The Lever reveal that KKR — in addition to generally slow-walking workers’ path to a union contract — has refused to accede to any worker demands that would create greater consistency in employees’ home life.

KKR’s current contract proposal guarantees workers just one day off every 12 days, even if they are working 12-hour shifts. Moreover, KKR promises in the proposal to the union that “all regular full-time employees shall have at least one consecutive Saturday and Sunday off every eight (8) weeks.”

In other words, these workers — nearly all of whom make less than $20 an hour, with health insurance coverage that can cost more than $450 monthly — would have just six weekends per year.

KKR founders and first cousins Henry Kravis and George Roberts are each worth more than $9 billion, according to the Bloomberg Billionaires Index. KKR has $471 billion in assets under management, and controls a sprawling empire that includes companies as varied as Axel Springer, the Germany-based, right-wing parent of Politico, and Brightspring, a misconduct-riddled group home company for people with disabilities.

KKR was made famous for their 1988 buyout of RJR Nabisco in 1989, which led to mass layoffs and significant press and governmental scrutiny, as well as an award-winning film.

Unbeknown to most, the KKR executives pushing back against Refresco employees owe part of their fortunes to the fees paid by the public pensions of unionized workers.

Major investors in KKR Global Infrastructure Investors IV include the following major public pensions: the New York Common Retirement Fund ($500 million in investment commitments), the Alaska Permanent Fund ($250 million), the New York City Employees Retirement System ($205 million), and the Minnesota State Board of Investment ($100 million).

KKR pointed out in its most recent annual report that public pensions “have historically been among the largest investors in alternative assets,” such as private equity and hedge funds.

KKR has long had a contentious relationship with organized labor — the secretary-treasurer of the AFL-CIO excoriated the firm before Congress in 1989 for laying off thousands of workers as part of its controversial buyout of RJR Nabisco — and private equity as a whole has often opposed unionization efforts and backed anti-worker candidates for elective office. But these facts are not common knowledge, even among the many union trustees that populate the pension funds’ boards.

Refresco workers have made efforts to leverage the public pension connection to KKR to help transform the working conditions at the New Jersey plant. Factory employees have met with the staff of New York City Comptroller Brad Lander, who sits on the Boards of the New York City Retirement Systems, and spoken with representatives of other pension funds invested in Refresco to let them know about the working conditions in the factory.

A key target for workers is Democratic New York Comptroller Tom DiNapoli. New York is nearly unique in that it gives this single elected official exclusive control over the $233 billion Common Retirement Fund, which combined has more than $2 billion invested in various KKR funds.

Ron Kim, a member of the New York State Assembly, as well as a participant in the Common Retirement Fund, said that DiNapoli has “tremendous” leverage over KKR, which is frequently raising new investments from pension funds. Using his powers, DiNapoli could choose to deny KKR additional new funds or audit the KKR funds in which the pension is currently invested.

“Limited partners like the New York Common have tremendous power as general partners like KKR are seeking pension money,” said Kim, who has championed legislative efforts to expose the secretive underbelly of alternative investments like private equity and hedge funds. “This is New York, there are hundreds of billions of dollars of public employee retirement money. There’s so much leverage. Why are we putting our public retiree money to fuel worker exploitation?”

DiNapoli did not respond to a request for comment, nor did KKR.

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