Noe Valley Voice April 2005

NLRB Hears Real Food Case

By Liz Highleyman

A year and a half after the abrupt closure of the Real Food Company store on 24th Street, the National Labor Relations Board (NLRB) held a hearing last month in the unfair labor practices lawsuit against Fresh Organics/Nutraceutical Corporation. The corporation terminated some 30 employees and shuttered the store without warning in late August 2003, ostensibly for the purposes of remodeling.

During the seven-day hearing (March 21-29), NLRB Administrative Law Judge James Kennedy and a courtroom packed with neighborhood residents heard testimony from more than 20 witnesses, including former Real Food/Fresh Organics employees, managers, company executives, and industry experts.

The NLRB's case was presented by attorneys Kathleen Schneider and Robert Guerra. In her opening statement, Schneider said she would attempt to show that Nutraceutical fired the 24th Street workers after management learned of their plans to organize, closing the store with no blueprints, permits, or landlord permission, "contrary to industry practice."

Fresh Organics/Nutraceutical was represented by attorneys Stephen Hirschfeld and Carmen Plaza deJennings.

Hirschfeld, himself a 16-year Noe Valley resident and regular Real Food customer, said he had taken a personal interest in the dispute. "I wasn't happy when it closed. There is no other good alternative for quality organic produce, and they had terrific customer service. But there's another side to the story."

Hirschfeld said that Nutraceutical, the Utah-based vitamin and supplement company that bought Real Food in 2002, intended "from the get-go" to do a significant renovation and use the 24th Street location as a "concept store." He added that the sudden closure "had zero to do with union activity," and that only after initial demolition did the company discover "very serious, severe, and unanticipated structural problems" that have delayed the remodeling far beyond the originally anticipated four to six months.

A Long Line of Witnesses

The bulk of the hearing was devoted to statements from former employees and managers of the 24th Street store and other local company-owned outlets, as well as Fresh Organics/Nutraceutical Vice President Bruce Remund and Marketing Director Sergio Diaz. These witnesses provided conflicting testimony regarding workplace performance issues, workers' "negative attitudes," inconsistencies in employee evaluations and discipline, and who said what to whom and when.

Among the witnesses were former 24th Street employees Adriel Ahern, Jonathan Burkett, Lisa Fagundes, Sarah "Mitch" Genlot-Joslyn, Simon Knaphus, and Joshua Peach, who were involved with the early union organizing effort, and Kim Rohrbach, who was not hired for an advertised position at another Fresh Organics store despite being seemingly well-qualified.

Under cross-examination by Plaza deJennings, the ex-employees testified that managers and company executives had not explicitly told them not to organize, nor had they threatened them with repercussions for their union activity.

Key to the case was the testimony by two former managers that Remund had told one of them that Nutraceutical CEO Bill Gay would rather close the 24th Street store than see it unionized; Remund denied that Gay had made such a statement.

Former manager David Kloski testified that when he expressed his discomfort with the terminations and concern for the fired employees, Diaz replied, "F- - k 'em," and Remund told him that "what we did was unethical, but I don't believe it was illegal," since a formal union drive was not yet under way.

The NLRB called several witnesses, including 24th Street building owner Jane Allen and a representative from the city's Department of Building Inspection, to attest that the store was closed with no advance notice to the landlord, the city, employees, vendors, or customers--a point the company did not contest. Schneider also presented evidence that Nutraceutical closed the 24th Street venue, the only local store that was turning a profit, with minimal advance planning.

Remund testified that the decision to close the store was based on a demographic study and financial analysis. While the company did not have detailed blueprints for the renovation, it did have "concept designs" for the Sausalito store that were applicable to 24th Street. While the exact date of the closure was only finalized by the Fresh Organics board four days prior to the event, he said, the company had decided to close the store "months before." Finally, he stated, employees were not given advance notice in order to avoid theft.

Big Boxes vs. Small Boxes

The hearing's final days were consumed by expert witness testimony regarding customary industry practices when closing and renovating stores.

Called by the NLRB, Russell Jacobus, who specializes in grocery real estate and financing, said that companies generally try not to close during remodeling, since doing so would cause customers to "form new shopping habits that do not include your store."

He stated that companies typically seek landlord approval, pull permits, provide advance notice to customers extolling the benefits of the coming renovations, and, if they must close, let their inventory run down--none of which were done in the case of shuttering the 24th Street store. Jacobus also said that he found the company's lack of detailed blueprints and financial justification documents "surprising."

Nutraceutical's expert, Thomas James, who specializes in retail store development and "rebranding," countered that the practices described by Jacobus apply to "big-box" stores such as Safeway. In contrast, "small-box" specialty retailers (those with fewer than 50 employees and less than 10,000 square feet) typically do not have room to stay open while remodeling, and that doing so would raise issues of safety, liability, and compliance with disability access laws.

He also said that small stores generally do not reveal an impending closure to landlords, the city, employees, or customers in advance, and that doing so is "typically a very large mistake." When planning a temporary closure, small retailers prefer to leave stores fully staffed and stocked until the last minute to leave customers with a good "last impression." Finally, he said that while large chains usually have detailed plans in place when closing a store, "this is not how small retailers act."

Initial testimony concluded on March 29. One final day of hearings is scheduled for late April to accommodate previously unavailable witnesses. After all testimony is heard, the NLRB general counsel has 30 days to file final briefs. Assuming there are no further delays, Judge Kennedy will then have an additional 30 days to render a verdict. Attorneys for both sides suggested that a decision probably would not come before mid-to-late summer.

Should Nutraceutical disagree with the judge's decision, it can appeal to the full NLRB. If the company contests the full board's decision, the case would enter the regular legal system and be brought before the 9th U.S. Circuit Court.

Kennedy reminded the parties that a settlement between Nutraceutical and the terminated workers remains an option.

Meanwhile Back in the Neighborhood...

Following a brief burst of activity at the beginning of the year, construction work at the empty store at 3939 24th Street again came to a halt in January. After reaching a preliminary agreement, "issues have bubbled back up" in the ongoing dispute between Nutraceutical/Fresh Organics and Jane and Kimball Allen, regarding what work is to be done and who will pay for it, according to Stephen Hirschfeld. "There will be no further work unless and until an agreement is reached," Hirschfeld told the Voice. While there is "no litigation at this time" between the two parties, the possibility has been mentioned.

On the other side of 24th Street, Bell Market appears to be taking advantage of the void left by Real Food's lengthy closure. During the week of March 27, Bell customers received a notice stating that the store was reducing its early-morning and late-evening hours in order to remodel. "Shoppers like yourself have expressed the desire for an increase of products directed toward the importance of health and well-being through organic foods, and we are listening," the notice read. Changes will be made to accommodate a new nutrition department, which will include "over 1,000 new health, organic, and earth-friendly items," as well as more room for organic produce.

In the meantime, Noe Valley neighbors continued to organize in support of the terminated Real Food workers. At a meeting on March 10, some 70 participants discussed the employees' status and signed up to attend the NLRB hearings. One proposal in the works is asking the Board of Supervisors to pass an anti-blight ordinance which would allow for legal recourse against owners that leave property vacant.

Attendees also discussed the formation of a new neighborhood organization proposed by Elizabeth Street resident Peter Gabel, to be called Noe Valleyans for Community and Social Justice (NVCSJ). The group plans to meet April 6 at the Noe Valley Ministry (6 p.m.).

On March 16, activists sent a letter to Bill Gay with the signatures of nearly 2,000 individuals who have pledged to boycott the 24th Street store if Nutraceutical reopens without addressing community concerns. "[T]he neighborhood as a whole has been seriously harmed by the loss of community that has resulted from the sense of blight that has been created by your protracted vacancy in what for us is the center of town," the letter read. "It is almost impossible not to feel you are a distant corporation interested only in your own bottom line and indifferent to the impact of your actions upon both the workers and residents of this neighborhood."

The letter also restated the activists' wish that Nutraceutical give up its lease and allow the storefront to be occupied by a locally owned health food store "more reflective of our community's values."

According to resident Art Persyko, a Nutraceutical secretary in Utah refused to accept the letter, which was sent by registered mail.