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Employees watching carefully as Tops files for Chapter 11 bankruptcy

Tops Markets said Wednesday its Chapter 11 bankruptcy filing would not affect the more than 14,000 employees at its headquarters in Amherst and its network of stores in three states.

But those workers, most represented by the United Food and Commercial Workers International Union Local One, will keep a close eye on proceedings in U.S. Bankruptcy Court in the Southern District of New York.

That's because courts allow companies that file for bankruptcy reorganization to alter their pension obligations and lower their employee headcount.

"I don't want to scare working people with my opinion, but it is a serious matter," said Lee Adler, a lecturer at Cornell University's School of Industrial and Labor Relations. "But still, a lot more things have to be known, looked at and evaluated before the most worrisome conclusion could or should be reached."

Tops said it has filed standard motions seeking approval to continue to pay employee wages and benefits during the reorganization, and it expects to receive the court's permission to do that. One filing argues that Tops risks harm to its business, including employee unrest, if it is not allowed to meet those obligations, including wages, health benefits and pension contributions.

Chairman and CEO Frank Curci also told The Buffalo News that the company will not try to restructure its labor contracts with its unionized workers during the bankruptcy reorganization.

However, Cornell's Adler said there are certain points in a bankruptcy proceeding when the company's creditors could ask the court to approve changes to collective bargaining agreements.

About 11,600 Tops workers are represented by UFCW Local One, and about 700 workers are represented by the International Brotherhood of Teamsters Local 264. The company has another 1,000 employees at five stores operated by franchisees.

Tops' chief restructuring officer, Michael Buenzow, said in a filing with the bankruptcy court that the company's pension plans with UFCW and the Teamsters are "significantly underfunded."

The UFCW fund alone is underfunded by about $393 million, Buenzow said.

In addition, Tops has been engaged in a "protracted and costly" arbitration fight with the Teamsters over pension fund contributions.

The fight started in late 2013 with Tops' acquisition of Erie Logistics from C&S Wholesale and concerns a withdrawal liability of more than $180 million. The dispute is scheduled to go to mediation this spring.

Buenzow said the company will take "reasonable steps" to resolve the pension issues with the consent of the unions as it goes through bankruptcy.

"I think workers have to be concerned, when there's a bankruptcy filing. But having concern, and equating that concern with a dark result, is not indicated yet," Adler said.

For example, Adler said, UFCW Local One may use its connections in the political and business communities, including with the suppliers on the list of Tops creditors, to try to stave off drastic action.

Tops also owes $3.08 million in benefits to the UFCW Local One Health & Welfare Fund in an unsecured claim.

The UFCW Local One Pension Fund and the New York State Teamsters Conference Pension & Retirement Fund also are listed as unsecured Tops creditors. The value of their liquidated benefits claims was not included in the filing.

UFCW Local One President Frank DeRiso did not respond to a request to comment Wednesday morning.

DiRiso issued a statement over the weekend saying the union was meeting with financial and legal experts and discussing its strategic options.

"Currently, Tops Markets is paying all contractual obligations including health, pension and 401K contributions. The contract for UFCW Local One’s 12,000 Tops members is in full effect," DeRiso said in the statement. "We are monitoring this situation daily and will keep members informed of new developments."

Adler noted that Tops has a large number of part-time workers, and those workers typically are less expensive for companies than full-time workers. Tops said about 9,000 of its employees are part-time and about 5,000 are full-time, and it said the company has a gross weekly payroll of $7.1 million.

It will be worth watching whether Tops or its creditors seek to replace full-time with part-time workers, said Adler, whose teaching and research focus on public- and private-sector unions.

In a bankruptcy filing, the primary responsibility for the court is to make the company viable, Adler said. The court's secondary obligation is to protect as best it can the interests of secured creditors, he said. Tops' filings don't make note of secured creditors.

"Different creditors have different philosophies about how to get their money, or how to make sure where they're placed in the queue is good enough for them," Adler said.

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