Tops Markets cleared another hurdle in its efforts to restructure in bankruptcy after unionized workers at its Lancaster warehouse approved a new contract that resolves a key pension dispute.
Members of Teamsters Local 264 voted by a wide margin to approve a two-year contract that resolves a major pension dispute that could have cost the company more than $180 million over a 20-year span.
The pension deal, which still needs to be approved by U.S. Bankruptcy Court, is a step toward clearing a major financial hurdle that Tops was facing and allows it to settle a bitter dispute that had dragged on for more than four years.
Tops agreed to use the money earmarked for a controversial $3.6 million executive bonus plan to fund most of its contribution to a new $15 million retirement fund that is being established for the warehouse workers. That new retirement fund, partly funded by the warehouse's former owner, C&S Logistics, will partially reimburse them for pension benefits they have not accrued since the pension dispute began in December 2013.
Those one-time payments are expected to average about $25,000 per eligible employee, in a new retirement-type account that will be established for them. It is likely, however, that payment will not fully reimburse the Tops warehouse workers for the additional pension benefits that they would have accumulated since the end of 2013.
The settlement angered many Teamsters workers because Tops, at one point, had set aside more than $20 million in a separate account to cover some of its obligations to the pension fund that were in dispute. But as Tops' finances deteriorated last year and its annual loss reached $80 million, it used that money to fund its operations. The account now is empty, according to a filing Tops made with the Bankruptcy Court. And because the money was co-mingled with the company's assets, rather than being held by a third-party or the Teamsters union, those funds are not recoverable by the union, sources familiar with the dispute said.
After acquiring the warehouse, Tops had been trying to make monthly payments of about $400,000 to cover its ongoing obligations to the pension fund. But the pension fund did not accept them because it contended that Tops' 2013 deal to buy the former Erie Logistics warehouse in December 2013 triggered a withdrawal from the pension plan. Consequently, the pension fund no longer considered the supermarket chain to be a participant in the pension fund and declined to accept any further payments from Tops.
Tops had been holding that money in a separate account as the dispute played out, but the supermarket company spent the money when it ran short on cash as its losses mounted.
The deal also gave workers at its warehouse 2 percent annual raises.