Betrayal Without Remedy: The Case of the Missing Wages

Monday’s Wall Street Journal tells the story of how the US company, Hostess Brands Inc., took its workers’ wages and used them to cover its own expenses (“Hostess Maneuver Deprived Pension” WSJ 12-10-12).

Hostess Brands (famous for Twinkies and Wonder Bread) has gone out of business after a lengthy bankruptcy process. During this process, information has come out about how corporations can break their contracts with, and steal from, their workers and yet escape prosecution for their actions. It is an object lesson on how the laws are written to benefit private property and capitalists at the expense of working people who are often denied equal protection.

Here is what Hostess did. It signed contracts with workers in which it was agreed that part of their wages would be diverted from their paychecks and invested in their pensions. This was a contribution made by the workers independently of the contractual payments made to the pension funds by the company.

In 2011, due to the company’s financial problems, Hostess announced that it would end payments to the pension funds. OK, that is one problem for the unions to deal with. But what happened to the workers’ wages that Hostess was supposed to be putting into the funds?

Well, Hostess did not start to include these payments in the worker’s paychecks. Instead they just kept their wages for the company and used them to pay for their own expenses. During an interview the new CEO, brought in to oversee the liquidation of the company, said this was “terrible” but , “I think it’s like a lot of things in this case. It’s not a good situation to have.” As to getting the money back– C’est la vie.

The WSJ reports that “experts” say that since the money didn’t come “directly” from the workers [?] no federal laws were violated (“probably”). Huh! The company says they will put the wages I earned into X and they divert it to Z and since I didn’t have it listed as “deducted” from my paycheck it didn’t come “directly” from me therefore it is really theirs!

The WSJ quoted a lawyer not involved in the case who said, “It’s what lawyers call betrayal without remedy. It’s sad, but that stuff does happen, unfortunately.” Why then would any union sign contracts with companies to co-contribute to their pension funds and allow the companies to oversee the payments if they can just keep them and the workers are “without remedy.” Is this gaping hole in federal law being addressed?

This betrayal only affected one of two major unions at Hostess: the Bakery, Confectionery, Tobacco and Grain Millers International Union. The Teamsters did not have this kind of arrangement with the company. The baker’s union did because “This local was very aggressive about saving for the future,” according to a union officer. This is just another example of the truth of the socialist adage that any future for workers under capitalism is problematic.

Update 1: The Kansas City Star reported on 12-10-12 that the National Labor Relations Board has found “that Hostess had failed to bargain collectively and in good faith with a union.”

Update 2: Hostess Brands issued the following statement on 12-11-12: “At no time were these pension contributions paid as wages, so no funds were ever ‘deducted from paychecks,’ as one news outlet erroneously reported. Hostess Brands has at all times continued to pay its union employees’ current wages in full compliance with its collective bargaining agreements.”

This statement from Hostess is a new low in the metaphysics of mendacity: since the wages were not first paid then deducted but went directly to the pension funds they were not wages. Caveat faber.